Demand and Supply

Question 1

Demand

Answer 1

The quantity which buyers are willing and able to purchase of a particular good or service over a given period of time, ceteris paribus

Question 2

Law of demand

Answer 2

increase in price, decrease in demand vice versa

Question 3

Demand functions

Answer 3

relationship between quantity demanded and price

Question 4

Normal goods

Answer 4

demand increases as income increases

Question 5

Inferior goods

Answer 5

demand increases as income decreases

Question 6

Complements

Answer 6

two or more goods that are consumed together, The price change of one affects the other in the same way

Question 7

Substitute goods

Answer 7

Two or more goods that are used for similar purposes and are in competition with one another. Positive cross elasticity of demand

Question 8

Giffen Goods

Answer 8

A type of inferior good. Price rises demand rises due to income effect

Question 9

Veblen Good

Answer 9

goods bought as a display of wealth and status, price rises demand rises, price decrease, demand decrease

Question 10

Supply

Answer 10

The quantity the seller is willing and able to sell of a particular good or service at a given point in time

Question 11

Law of supply

Answer 11

Increase in price, increase in supply, ceteris paribus and vice versa

Question 12

Supply function

Answer 12

relationship between quantity supplied and price

Question 13

Equilibrium price

Answer 13

the price at which the qd equals the qs so that the market is cleared

Question 14

Allocative efficiency

Answer 14

The efficiency with which markets are allocated resources. Markets will be efficient when it is producing at equilibrium

Question 15

Consumer surplus

Answer 15

Consumers are able to buy a good or service for less than they are willing to pay. Area between demand curve and equilibrium price

Question 16

Producer surplus

Answer 16

the difference between the minimum price accepted to supply a given quantity of a good and the price actually received