LU 3 Demand, Supply and Price determination

Question 1

Demand

Answer 1

Quantity of certain goods that people actually plan and are able to buy during a certain period (without buying power ‘income’ there can be no demand)

Question 2

What determines quantity demanded

Answer 2

• the price of the product or good
• the prices of related goods
• the income of the consumer
• the taste of the consumer
• the size of the household

Question 3

Law of demand

Answer 3

The higher the price of a good or service the lower the quantity demanded, the lower the price of a good or service the greater the quantity demanded

Question 4

Demand schedule

Answer 4

Relationship between price and quantity demanded

Question 5

Demand curve

Answer 5

What the demand schedule is represented by

Question 6

Reasons for law of demand

Answer 6

• The substitution effect

* The income effect

Question 7

Substitutes in consumption

Answer 7

Consumers can replace the one good with another good

Question 8

Complements in consumption

Answer 8

Goods are used together.

Question 9

Supply

Answer 9

Relationship between the market price of a product and the quantities of those product producers are willing to supply.

Question 10

Factors determining supply

Answer 10

• price of the product
• price of alternative products
• price of factors of production
• expected future prices
• the state of technology
• weather conditions

Question 11

Substitutes in production

Answer 11

Products that can be produced instead of the other.

Question 12

Complements in production

Answer 12

Products that are produced jointly

Question 13

Equilibrium

Answer 13

Quantity demanded equals the quantity supplied

Question 14

Equilibrium price

Answer 14

Price at which the quantity voluntarily supplied and quantity voluntarily demanded are equal

Question 15

Competitive equilibrium

Answer 15

point where quantity demanded and quantity supplied are the same.