Chapter 4: Supply and Demand

Question 1

What is a market?

Answer 1

A market is simply a group of buyers and sellers

Question 2

When does a market become competitive?

Answer 2

When there are numerous producers that compete with one another in hopes to provide goods and services we, as consumers, want and need.

Question 3

Supply

Answer 3

The price of a good or service is determined by the amount of that good or services sellers are willing and able to sell

Question 4

What does supply and demand help us understand?

Answer 4

understand and predict prices for goods and services and is one of the most important models in microeconomics.

Question 5

Demand

Answer 5

The price of a good or service is determined by the amount of goods or services buyers are willing and able to buy.

Question 6

Law of demand

Answer 6

the quantity purchased varies inversely with price.

Question 7

As the price for a good or service rises, consumers quantity demanded for the good will…

Answer 7

decline

Question 8

As the price for a good or service drops, consumers quantity demanded for the good will

Answer 8

rise

Question 9

Demand Schedule

Answer 9

a table that illustrates the relationship between the price, and the quantity of a good demanded.

Question 10

Market Demand

Answer 10

the sum of the quantity demanded at each price point by each and every consumer within a given market.

Question 11

Individual Demand

Answer 11

the demand for a good or a service by an individual (or a household)

Question 12

Demand Increases

Answer 12

we are saying the demand curve has shifted to the right. This is caused by a change in a non-price variable, which we cover in the following section.

Question 13

Demand decreases

Answer 13

we are saying the curve has shifted left.

Question 14

Quantity demanded increases

Answer 14

we are referring to a movement along a fixed demand curve caused by a drop in the price of that good.

Question 15

Quantity demanded decreases

Answer 15

we are referring to a movement along the curve caused by a rise in the price of that good.

Question 16

Five common non-price factors that can shift the demand curve.

Answer 16

1. The number of buyers
2. Buyers Income
3. Prices of Related Goods
   4.Taste
   5.Buyers expectations

Question 17

High Pricing

Answer 17

If the price is well above the accepted market value, it is unlikely that there will be any demand for their product.

Question 18

Low Pricing

Answer 18

Conversely, if the price is too low below the accepted market value, the banana farmer may not be able to recoup the costs of inputs, such as the cost of machinery and fuel, or renting land.

Question 19

Law of supply

Answer 19

as prices increase, so does the amount produced by sellers.

Question 20

As the price for a good or service rises, the quantity supplied by the seller will….

Answer 20

increase

Question 21

As the price for a good or service drops, the quantity supplied by the seller will….

Answer 21

decrease

Question 22

Supply schedule

Answer 22

a supply schedule shows the relationship between the price of a good and the quantity supplied

Question 23

The market supply

Answer 23

the sum of the quantities supplied by all the sellers at each price

Question 24

What are the characteristics of a competitive market?

Answer 24

Many buyers and sellers; no single participant can influence the price (price takers).