KT 3 - 1.3.1 Demand, 1.3.2 Supply, 1.3.3 Price Determination

Question 1

Demand

Answer 1

the willingness and ability to pay for a good.

Question 2

Demand schedule

Answer 2

a table showing the quantities demanded at a different price levels, e.g. hot chocolate – above.

Question 3

Demand curve

Answer 3

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

Question 4

Consumer sovereignty

Answer 4

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

Question 5

Movement along the demand curve

Answer 5

either a contraction or an expansion.

Question 6

Contraction of demand

Answer 6

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

Question 7

Expansion of demand

Answer 7

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

Question 8

Determinants of demand

Answer 8

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

Question 9

Shift in the demand curve

Answer 9

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

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

Question 11

Supply

Answer 11

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

Question 12

Short run

Answer 12

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

Question 13

Long run

Answer 13

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

Question 14

Determinants of supply

Answer 14

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