Demand, supply and market equilibrium

Question 1

Define Demand

Answer 1

Demand is the willingness and ability of consumers to purchase goods and servises at a given price over a period of time.

Question 2

What causes shifts in the demand curve?

Answer 2

• Advertising
• Income
• Fashion and tastes
• Price of substitutes
• Price of complementary goods
• Demographis changes

Question 3

Define Supply

Answer 3

Supply is the willingness and ability of producers to provide a good or service at a given price over a period of time.

Question 4

What causes a shift in the supply curve?

Answer 4

• Costs of production
• Changes in technology
• Indirect taxes
• Subsidies
• Natural factors

Question 5

What is a subsidy?

Answer 5

A subsidy is a grant given to producers by the government, to encourage suppliers to increase production of a good or service, leading to a fall in price.

Question 6

What is market equlibrium?

Answer 6

Market equilibrium is the point where the quantity demanded equals the quantity supplied at a certain price.

Question 7

What is excess demand?

Answer 7

Excess demand occurs when demand exceeds supply at a given price

Question 8

What is excess supply?

Answer 8

Excess supply occurs when supply exceeds demand at a given price.

Question 9

How do market forces remove excess demand and supply?

Answer 9

• Excess demand - Price rise
• Excess supply - Price fall