KT 3: 1.2.3 Factors of production, 1.3.1 Demand, 1.3.2 Supply

Question 1

Demand

Answer 1

Demand - the willingness and ability to pay for a good.

Question 2

Demand schedule

Answer 2

Demand schedule – a table showing the quantities demanded at a different price levels

Question 3

Demand curve

Answer 3

Demand curve – a graphical representation of the relationship between quantity demanded and price.

Question 4

Consumer sovereignty

Answer 4

Consumer sovereignty - market forces being consumer demand interacting with producers’ supply leading to an allocation of resources.

Question 5

Movement along the demand curve

Answer 5

Movement along the demand curve - either a contraction or an expansion.

Question 6

Contraction of demand

Answer 6

Contraction of demand – move up and left on a demand curve when price rises.

Question 7

Expansion of demand

Answer 7

Expansion of demand – move down and right on the demand curve when price falls.

Question 8

Determinants of demand

Answer 8

Determinants of demand – factors which influence demand for a good.
•Price
•Income
•Tastes
•Advertising
•Population
•Complementary goods
•Substitutes

Question 9

Shift in the demand curve

Answer 9

Shift in the demand curve – when quantity demanded changes for reasons other than price- e.g. a change in incomes or tastes and fashions.

Question 10

Supply curve

Answer 10

Supply curve – a graphical representation of the relationship between quantity supplied and price, for all suppliers in the market.

Question 11

Supply

Answer 11

Supply – the willingness and ability of a producer to supply a good.

Question 12

Short run

Answer 12

Short run – the time period in which the quantity of at least one component in production cannot be changed.

Question 13

Long run

Answer 13

Long run – the time period in which the quantities of all factors of production can be changed.

Question 14

Determinants of supply

Answer 14

Determinants of supply – price, state of technology, entry and exit of firms, taxes and subsidies, costs of production and external shocks.