How Markets Work

Question 1

What is the definition of supply??

Answer 1

Quantity of a good/service that all firms plan to sell

Question 2

Definition of demand

Answer 2

When the demand for a product changes due to the change in price

Question 3

What is equilibrium

Answer 3

Where the supply and demand curve meet

Question 4

Factors of production?

Answer 4

Land, labour, capital, enterprise

Question 5

Positive and an example

Answer 5

Something that can be proven with a valued judgement such as: the sky is blue

Question 6

Normative and an example

Answer 6

An opinion of something such as: Messi is the best at football

Question 7

PPF statement and what is it?

Answer 7

Production possibility frontier and it shows maximum output combinations of 2 goods when all resources are used fully and efficiently.

Question 8

price elasticity of demand

Answer 8

% change in quanitity demanded

% change in price

Question 9

income elasticity

Answer 9

% change in quanity demanded

% change in income

Question 10

cross elasticity of demand

Answer 10

% change quantity demand of product A

% change in price of product B

Question 11

elasticity of supply

Answer 11

% change in quantity supplied

% change in price

Question 12

shortage

Answer 12

below the equilibrium which is not enough resources

Question 13

surplus

Answer 13

above equilibrium and using too many resouces

Question 14

ceteris paribus assumption

Answer 14

it freezes all factors except one when looking into demand of one firm

Question 15

productive efficiency

Answer 15

when you can’t make more of one good without producing less of another product

Question 16

allocative efficiency

Answer 16

where goods/services are produced to please the needs of the customers.

Question 17

left shifting curve

Answer 17

change in production cost and supply and demand decreases

Question 18

right shifting curve

Answer 18

there’s a change in production cost and the supply and demand increases when the curve moves right.

Question 19

production possibility diagrams

Answer 19

shows points where all informations used. below the curve is the recession.