How Markets Work

Question 1

Total effective demand of all consumers willing and able to buy the product at a particular time

Answer 1

Market demand

Question 2

Downward sloping

As price rises,_________contracts

Answer 2

Demand curves

Question 3

Similar products that compete to satisfy the same consumer demand

Answer 3

Substitute

Question 4

Total quantity supplied by all producers of that product

Answer 4

Market supply

Question 5

Upward sloping

As price rises,___________ expands

Answer 5

Supply curve

Question 6

Market demand is equal to market supply

Answer 6

Equilibrium

Question 7

Market price is stable

Consumers buy exactly the same amount that firms sell

Answer 7

Market price

Question 8

When demand does not equal supply

Answer 8

Market disequilibrium

Question 9

Measures the responsiveness of demand to change in prices

Answer 9

Price elasticity of demand

Question 10

If a small increase in the price causes a large decrease in the demand of a product

Answer 10

Price elastic

Question 11

If a small increase in the price causes a small decrease in the demand of a product

Answer 11

Price inelastic

Question 12

Measure the responsiveness of supply to changes in price of a product

Answer 12

Price elasticity of supply

Question 13

Amount of income income left to save/use after taxes on their incomes have been paid

Answer 13

Disposable income

Question 14

An ____________ in demand curve occurs when price falls

Answer 14

Extension

Question 15

A ______________ contraction in demand curve occurs when price rises

Answer 15

Contraction

Question 16

Market demand will shift to the right

Consumers now demand more at every possible price

Answer 16

Rise in demand

Question 17

Demand curve will shift inwards to the left

Consumers now demand less at every possible price

Answer 17

Fall in demand

Question 18

If market demand changes for any other reason other than price

Answer 18

Shift in market demand

Question 19

Products that are in joint demand

Rise in the price of one will lead to a fall in demand for both

Answer 19

Complementary products

Question 20

An ____________ in supply occurs when prices rise

Answer 20

Extension

Question 21

A ______________ in supply occurs when prices fall

Answer 21

Contraction

Question 22

Supply curve will shift outwards to the right

Firms now supply more at every possible price

Answer 22

Rise in supply

Question 23

Supply curve will shift inwards to the left

Firms now supply less at every possible price

Answer 23

Fall in supply

Question 24

Above market price/equilibrium

Quantity supplied exceeds quantity demanded

Answer 24

Excess supply

Question 25

Below market equilibrium | Quantity demanded exceeds quantity supplied

Answer 25

Excess demand

Question 26

%change in quantity demanded __________________________________ %change in price

Answer 26

Price elasticity of demand

Question 27

If PEd is greater than 1

Answer 27

Price elastic

Question 28

If PEd is less than 1

Answer 28

Price inelastic

Question 29

Demand remains constant whatever the price

Answer 29

Perfectly price inelastic

Question 30

Unlimited demand, only at one price

Answer 30

Infinitely price inelastic

Question 31

Revenue remains constant at every possible price

Answer 31

Unitary elasticity

Question 32

%change in quantity supply ---------------------------- % change in price

Answer 32

Price elasticity of supply

Question 33

PEs is greater than 1

Answer 33

Price elasticity(of supply)

Question 34

PEs is less than 1

Answer 34

Price inelastic(of supply)

Question 35

Tax on the price of a product Increases cost of production *same effect as fall in supply

Answer 35

Indirect tax

Question 36

An assistance in which the government pays producers to reduce their cost of production: to encourage firms to reduce prices

Answer 36

Subsidy