demand supply and equilibrium

Question 1

what is market equilibrium

Answer 1

market equilibrium is a situation where for a particular good, supply is equal to demand. When the market is in equilibrium, there is no tendency for prices to change. We say the market-clearing price has been achieved.

Question 2

what is demand

Answer 2

demand is the quantity of a good/service consumers are willing or able to buy at a given price in a given time period

Question 3

what is the law of demand

Answer 3

there is an inverse relationship between price and quantity demanded (as price increases quantity decreases) vice versa

Question 4

what are the two effects of demand

Answer 4

There are two effects responsible for the law of demand: income effect, which states that the higher the price, the less the household can spend on the good with the limited income it has,
and the substitution effect, which predicts that an increase in price makes the household substitute away from the good towards cheaper substitutes

Question 5

what are the non price factors that can shift the demand curve-pacsfic-

Answer 5

population
advertising
substitutes price
income
fashion/taxes
interest rates
complements price(a good that’s also bought with others)

Question 6

what is supply

Answer 6

supply is the quantity of a good/service producers are willing and able to produce at a given price in a given time period

Question 7

what is the LAW of supply

Answer 7

there is a direct relationship between price and quantity supplies. As price increases so does quantity and vice versa

Question 8

what are the non price factors for supply

Answer 8

productivity
indirect tax
number of firms
technology
subsidy
weather
cost of production