introduction to demand and supply

Question 1

what is a market ?

Answer 1

a market is anywhere where buyers and sellers come together to transact with each other

Question 2

what is demand ?

Answer 2

Demand is the quantity of a good or service that consumers are willing and able to purchase at different prices over a specific time period.

Question 3

what is a demand curve ?

Answer 3

A demand curve is a graph showing the relationship between the price of a good and the quantity demanded

Question 4

define equal distribution ?

Answer 4

Equal distribution refers to the fair and even allocation of resources

Question 5

what are substitute goods ?

Answer 5

Goods that can replace each other; when the price of one increases, the demand for the other typically increases (e.g., butter and margarine).

Question 6

what are complementary goods ?

Answer 6

Goods that are often used together; when the price of one increases, the demand for the other usually decreases (e.g., coffee and sugar).

Question 7

define derived goods

Answer 7

Derived Demand : Is the demand for a good or factor of production used in making another good / service. E.g. an increase in the demand for makeup artists will lead to an increased derived demand for makeup.

Question 8

define composite goods

Answer 8

Composite Demand : This means changes in the demand curve for cars could lead to changes in the demand curve for car air
fresheners.

Question 9

what are non-price factors that affect the demand curve

Answer 9

• Population: An increase in population, such as through immigration, typically shifts the demand curve to the right, indicating higher demand.
• Advertising: Positive advertising can boost demand, shifting the demand curve rightward, even if the price remains unchanged.

*Substitute Goods (Price of): If the price of substitute goods rises, consumers may turn to the original good, increasing its demand and shifting the curve right.

• Income: An increase in consumer income generally raises demand for normal goods

Question 10

what are the Factors Causing a Shift in the Supply Curve ?

Answer 10

Changes in Production Costs: Increases in costs (wages, raw materials, energy, rents, interest rates) reduce producers’ profits, shifting the supply curve left.

• Changes in Technology: Technological improvements can reduce production costs, increasing supply and shifting the curve to the right (e.g., energy-efficient equipment).
• Changes in Productivity: Higher productivity from factors of production allows more output from the same inputs, shifting the supply curve to the right.

Question 11

define Marginal Utility

Answer 11

Marginal Utility: The additional benefit or satisfaction gained from consuming one more unit of a good.

Question 12

define Total Utility

Answer 12

Total Utility: The overall satisfaction or benefit obtained from consuming a certain quantity of a good.

Question 13

define Law of Diminishing Marginal Utility

Answer 13

Law of Diminishing Marginal Utility: Each additional unit consumed provides less satisfaction than the one before.