2.5 The Interaction Of Markets

Question 1

Define ceteris paribus

Answer 1

Providing all other conditions remain the same

Question 2

What is equilibrium price and quantity and quantity

Answer 2

This is when supply meets demand

At market equilibrium, price has no tendency to change, and is known as the market clearing price

Question 3

How can you show market equilibrium on a diagram

Answer 3

Question 4

Explain the excess demand in this diagram

Answer 4

Question 5

Explain the excess supply in this diagram

Answer 5

Question 6

When is a new market equilibrium established

Answer 6

When the demand or supply curves shift

Question 7

Explain the impacts on a new market equilibrium in this diagram

Answer 7

Question 8

Explain the impacts of this diagram

Answer 8

Question 9

Give an example of the impact of changes in demand or supply in one market on a related market

Answer 9

Question 10

How useful is supply and demand in analysing the market of commodities

Answer 10

Question 11

Why might supply tend to be unstable in the market of commodities

Answer 11

Question 12

How useful is supply and demand in analysing the market of housing

Answer 12

Question 13

How useful is supply and demand in analysing the market of transport

Answer 13

Question 14

What are the assumptions underlying the model of supply and demand

Answer 14

Question 15

When is supply and demand useful in explaining real world problems

Answer 15

The model is useful for competitive markets, where there are many buyers and sellers

Question 16

When is supply and demand not useful in explaining real world problems

Answer 16

In real life, consumers and producers do not have perfect information, and they do not always act rationally, like the model suggests