Lesson 3 and 4

Question 1

is the value of goods and the cost of making the goods.

• it is determined by the interaction of the forces of supply and demand.

Answer 1

Price

Question 2

is associated with consumption and is represented by buyers or consumers.

Answer 2

Demand

Question 3

is associated with production and is represented by sellers or producers.

Answer 3

Supply

Question 4

This refers to the willingness of the buyers to buy the product given price, time and place.

Answer 4

Demand

Question 5

• There is an element of purchasing power, this means you have the capability to buy the product or service.

Answer 5

Demand

Question 6

shows the inverse relationship between price and quantity demanded.

Answer 6

Demand schedule

Question 7

The law states that, “If price increases quantity demanded decreases. If price decreases quantity demanded increases.”

Answer 7

Law of demand

Question 8

when price of product increases consumers will able to buy less within a
given money income.

Answer 8

Income effect

Question 9

when the price of the product rises consumers shift their
purchases to other products whose price are relatively lowe

Answer 9

Substitution effect

Question 10

this refers to a movement of the demand curve itself, indicating changes in quantities bought at each price.

Answer 10

Change in demand

Question 11

this means if quantity demanded increases the demand curve will shift to the right and if quantity demanded decreases the demand curve will shift to the left at its price

Answer 11

Change in demand

Question 12

refers to the movement along a given demand curve caused by change in price.

Answer 12

Change in quantity demanded

Question 13

people buy more goods and services when their income increases

Answer 13

Income

Question 14

more people means more demand for goods and services.

Answer 14

Population

Question 15

demand for goods and services increases when people likes it or prefer it.

Answer 15

Taste and preferences

Question 16

if price is expected to increase in basic commodities consumers will have panic
buying.

Answer 16

Price expectation

Question 17

when price of certain product increases buyers tend to buy substitute
product.

Answer 17

Price of related goods

Question 18

the theory is only true and correct if the assumption of ceteris paribus is applied, which means all other things are equal or constant.

Answer 18

Validity of the law of demand

Question 19

these are commodities whose demand varies directly with money
supply (ex. Appliances; jewelry).

Answer 19

Superior/Normal goods

Question 20

these are goods whose demand varies inversely with money income (ex. Used
clothing; second hand cars).

Answer 20

Inferior goods

Question 21

the price of one good and the demand for the other are directly related (ex.
Coke & Pepsi; Ariel & Surf laundry powder soap)

Answer 21

Substitute goods

Question 22

these are goods that go together and that they are jointly demanded.
The price of one good and the demand for the other are inversely related (ex. Car and gasoline; mobile phone and battery).

Answer 22

Complimentary goods

Question 23

these are goods which are not related at all (ex. Bread and nails; paper and glass).

Answer 23

Independent goods

Question 24

refers to the willingness of the seller or producer to sell or produce the product at a given price, time and place.

Answer 24

Supply

Question 25

shows the direct relationship between price and quantity.

Answer 25

Supply schedule

Question 26

The law states that, “If price increases quantity supply increases. If price decreases quantity supply decreases.”

Answer 26

Law of supply

Question 27

refers to the movement of the supply curve indicating changes in quantity bought at each price.

Answer 27

Change in supply

Question 28

refers to the movement along the supply curve caused by the change in price.

Answer 28

Changing quantity supplied

Question 29

this refers to the techniques or methods of production, which increases supply of
goods.

Answer 29

Technology

Question 30

this refers to raw materials, labor and the like. Thus, an increase of these
increase the cost of production and decrease of quantity supplied.

Answer 30

Cost of production

Question 31

more sellers means more supply and vice versa.

Answer 31

Number of sellers

Question 32

changes in the price of goods affect the supply of such goods. An increase of
price of one good, decreases its quantity supplied and increases the quantity supplied of its
substitute product.

Answer 32

Prices of other goods

Question 33

if producers expect prices to rise very soon, they usually keep their goods and
then release them in the market when the prices are already high.

Answer 33

Price expectations

Question 34

this creates artificial shortage due to hoarding.

Answer 34

Brace expectations

Question 35

quantity supplied decreases before the increase of price and it will increase (quantity supplied) during the increase of price.

Answer 35

Price expectations

Question 36

taxes increase cost of production and it discourages production because it reduces the earnings of businessmen

Answer 36

Tax and subsidies

Question 37

subsidies reduce cost of production so it induces the farmers to produce more.

Answer 37

Taxes and subsidies

Question 38

• in the market supply and demand interact freely.

Answer 38

Law of supply and demand

Question 39

• sellers are willing to sell at a higher price which results to surplus of goods.

Answer 39

Law of supply and demand

Question 40

• to sell the surplus goods sellers will reduce their price.

Answer 40

Law of supply and demand

Question 41

• buyers are willing to purchase at a lower price which results to shortage of goods.

Answer 41

Law of supply and demand

Question 42

• if shortage of goods happen buyers are willing to get the higher price to get the available goods.

Answer 42

Law of supply and demand

Question 43

is a situation where quantity supplied is equal to quantity demanded.

Answer 43

Equilibrium price

Question 44

• it means both seller and buyer have mutual agreement.

Answer 44

Equilibrium price

Question 45

• in the process of interaction between buyers and sellers price tend to move towards the equilibrium price.

Answer 45

Equilibrium price

Question 46

The law states that, “When supply is greater than demand price decreases. When demand is greater than supply price increases. When supply is equal to demand price remains constant.”

Answer 46

Statement of the law of Supply and demand

Question 47

indicates the extent to which changes in price or other factors cause changes in the quantity demanded. Mankiw (2018) explains the three classifications of demand elasticity: price elasticity of demand, income elasticity of demand, and cross elasticity of demand.

Answer 47

Demand elasticity

Question 48

refers to the reactions or responses of the buyers to changes in the price of goods and services. There is five price elasticity of demand: elastic demand, inelastic demand, unitary demand, perfectly elastic demand, and perfectly inelastic demand. This classification helps understand how sellers use price elasticity in their pricing decisions (Manapat and Pedrosa, 2014):

Answer 48

Price elasticity of demand

Question 49

where a change in price results in a greater change in quantity demanded. Buyers are very sensitive to price change. Such products are not crucial to buyers. These are luxury goods.

Answer 49

Elastic demand

Question 50

where a change in price results in a lesser change in quantity demanded. Buyers are not sensitive to price change. Products under this category are essential to buyers like basic commodities.

Answer 50

Inelastic demand

Question 51

is when a change in price results in an equal change in quantity demanded. Goods under this category are considered semi-essential or semi- luxury goods.

Answer 51

Unitary demand