Supply and Demand

Question 1

What is demand

Answer 1

The amount of goods and/or services consumers are willing and able to buy in a given period of time at a given price, ceteris paribus (other things remaining constant)

Question 2

What is the law of demand

Answer 2

If the price of something increases then the demand decreases

Question 3

Factors affecting demand

Answer 3

• Change in price/demand of related goods
• Change in consumer’s money income
• Change in taste and preferences
• Changes in the price of related goods (substitutes and complements)
• Changes in seasonal factors

Question 4

What is supply

Answer 4

The amount of goods a producer is willing and able to sell in a given period of time, at a given price, ceteris paribus (other things remain constant)

Question 5

What is the law of supply

Answer 5

The law of supply states that in a given time period, the quantity supplied of a product is directly related to its price, ceteris paribus

Question 6

Price factors that affect supply

Answer 6

○ Change in price of factor inputs (factors of production)
○ Change in price of related goods
○ Change in state of technology
○ Change in weather condition
○ Change in government policy
- A change in a non-price factor that affects supply will cause either a leftward or rightward shift of the supply curve