S&D Graphs

Question 1

What is a Demand Curve?

Answer 1

A Demand curve is a representation of how the demand of a good or service changes with its price.

Question 2

What is a Supply Curve?

Answer 2

A supply curve is a representation of how the supply of a good or service changes with its price.

Question 3

Ceteris Parabus Meaning

Answer 3

assuming all other things are constant

Question 4

What is the law of demand?

Answer 4

The law of demand states that as the price of a good rises, people buy less of it, Ceteris Parabus

Question 5

What is the law of supply?

Answer 5

The law of supply states that as the price of a good or service rises, the quantity supplied will also rise, Ceteris Parabus.

Question 6

How do price factors change the demand curve?

Answer 6

Causes a movement along the demand curve

Question 7

How do non-price factors change the demand curve?

Answer 7

When non price factors change, there is a new demand curve.

Question 8

What is a normal good with an example?

Answer 8

Have a direct relationship between income and demand. Example - Clothing

Question 9

What is an inferior good? Provide an example.

Answer 9

Have an inverse relationship between income and demand. Example - Generic Clothing and Home brand food

Question 10

Name 3 non price factors that affect demand.

Answer 10

• Change in consumer income for a normal good.
• Change in consumer income for a inferior good.
• Change in the price of a complementary good.
• Change in the price for a substitute good.
• Change in taste and preferences.
• Change in the expectation of the future price of the good.
• Change in the number of consumers in the market.

Question 11

What happens when price factors affect supply?

Answer 11

There is a movement along the supply curve

Question 12

What happens when non price factors affect supply?

Answer 12

There is a new curve

Question 13

Name non price factors that affect supply.

Answer 13

• Change in technology
  -Change in production costs (input costs)
  -Change in the expectation of future prices
  -Changes in the number of producers in the market

Question 14

What is the indeterminant factor in simultaneous shifts of the supply and demand line?

Answer 14

It is the factor in the graph that cannot be ascertained until the exact ratio of the proportional shift in the supply and demand lines. Can either be price or Quantity

Question 15

What is a substitute good?

Answer 15

A substitute good is a good that is bought instead of another good by a consumer

Question 16

A complementary good is…

Answer 16

A good that is bought with another good by a consumer.