Demand and Supply

Question 1

definition demand

Answer 1

The willingness and ability to purchase a quantity of a good or service at a certain price.

Question 2

The demand curve is

Answer 2

the market demand curve

Question 3

what determines demand

Answer 3

• price
• price of related goods
• consumer income
• fashion
• population

Question 4

effect on demand curve

Answer 4

Price = movement along the curve

any other factor= shift the curve

Question 5

shift in the demand curve

Answer 5

change in the price of related good
subsitutes
complements
normal goods (rise income = demand increase)
inferior good (rise income = demand decrease)

Question 6

Linear Demand function

Answer 6

Qd = a-bP
a is the Q intercept when P = 0
-b is the slope of the demand line

Question 7

demand schedule

Answer 7

table with QD to Price

Question 8

market demand definition

Answer 8

the sum of all the individual demand for a product from buyers in the market.

Question 9

supply definition

Answer 9

A stock that can made for consumers with the necessary resource

Question 10

determinants of supply

Answer 10

price
cost of production
number of producer
technology
government legislqtion
price of related god

Question 11

effects on supply curve

Answer 11

price = movement along the curve

any other = shift

Question 12

shift in the supply curve

Answer 12

cost of production

change price of other firms

Question 13

linear supply function

Answer 13

Qs=c+dP
c is the shift of the curve
+d make it more or less steep

Question 14

price determination on the market

Answer 14

market equilibrium = surplus S bigger than D

shortage = supply lower than D

Question 15

Market clearing price

Answer 15

free market force to come back to equilibrium

Question 16

factors of production

Answer 16

land, labor, capital, entrepreneurship: resources necessary to create goods and services within an economy

Question 17

consumer surplus

Answer 17

The difference between what consumers are willing tot pay and the market price. DIAGRAM TO DRAW

Question 18

producer surplus

Answer 18

The difference in the amount that a producers receives and the minimum price they are willing to sell at. DIAGRAM TO DRAW

Question 19

total surplus

Answer 19

sum of consumer surplus and producer surplus.

Question 20

functions of price

Answer 20

• adam smith invisible hand
• price mechanism
• rationing
• signaling
• incentive

Question 21

adam smith invisible hand

Answer 21

unobservable market force that helps the demand and supply of of goods in a free market to reach equilibrium automatically.

Question 22

price mechanism

Answer 22

is the process by which prices rise or fall as a result of changes in demand and supply.

Question 23

the rationing function of price

Answer 23

In a free economy, resources are allocated based on the price: High demand and low supply = high price
low demand and high supply = low price

Question 24

the signaling function of price

Answer 24

Prices acts as important information for buyers and sellers

Question 25

the incentive function of price

Answer 25

Prices can act as a motivation for buyers and sellers.

Question 26

interest definition

Answer 26

financial gain; the difference between amount earned and the cost of production (amount spent)

Question 27

profit definition

Answer 27

the return on investment in capital equipment