Price Mechanism

Question 1

Derived Demand

Answer 1

The demand for a factor of production resulting from the demand for a consumer good

Question 2

Composite demand

Answer 2

A good that is demanded more than one purpose so that an increase in demand for one reduces the available supply for the other, normally leading to higher prices

Question 3

Competitive demand

Answer 3

Demand for a consumer good at the expense of demand for a related consumer good

Question 4

Competitive supply

Answer 4

Occurs when producers have the ability to choose between using their resources to produce one good or another

Question 5

Joint supply

Answer 5

Occurs when an increase in the supply of one good also involves an increase in the supply of another good

Question 6

Consumer surplus

Answer 6

The difference between the total amount that consumers are willing and able to pay for a good or service and the total amount that they actually pay

Question 7

Producer surplus

Answer 7

The difference between the price producers are willing and able to supply a good for and the price they actually receive

Question 8

Direct tax

Answer 8

A tax on income, profit or wealth

Question 9

Indirect tax

Answer 9

A tax on the purchase of a good or service

Question 10

Ad valorem tax

Answer 10

An indirect tax comprised of a percentage of the value of the good

Question 11

Specific tax

Answer 11

An indirect tax comprised of a set amount per unit

Question 12

Incidence of tax

Answer 12

Indicates the proportion of an indirect tax paid for by consumers and by producers

Question 13

Producer subsidy

Answer 13

A sum of money paid to producers by the government in order to encourage production and reduce prices for consumers