supply and demand

Question 1

market

Answer 1

any place, physical or virtual, where the buyers and sellers of goods and services meet

Question 2

demand

Answer 2

quantity of a good or service that a consumer or group of consumers are willing and able to purchase at a given price, during a particular time peroid

Question 3

law of demand

Answer 3

as the price of a good increases, the quantity demanded of the good decreases

Question 4

ceteris paribus

Answer 4

all other variables are held constant

Question 5

non-price determinants of demand

Answer 5

• income
• tastes and preferences
• future price expectations
• price of related goods (substitutes / complements)
• number of consumers

Question 6

normal goods

Answer 6

goods for which demand increases as income rises

Question 7

inferior goods

Answer 7

goods for which demand decreases as income rises

Question 8

substitute goods

Answer 8

• goods that one might easily use in place of another
• one for which demand will increases when the price of another good increases

Question 9

complementary goods

Answer 9

• are typically used in combination with each other, are also purchased and consumed together
• demand for one decreases when the price of the other increases

Question 10

movement along demand curve

Answer 10

caused by change in price

Question 11

shift along demand curve

Answer 11

change in non-price determinants

Question 12

supply

Answer 12

quantity of a good that producers are willing and able to produce at a given price over a particular time period, ceteris paribus

Question 13

law of supply

Answer 13

• ceteris paribus, there is a direct relationship between a good’s price and the quantity supplied
• as price increases, more of a good is supplied by the firms

Question 14

marginal cost

Answer 14

cost of producing an additional unit of output

Question 15

non-price determinants of supply

Answer 15

• will cause the supply curve to shift outwards or inwards to reflect a change in the market at every price
• changes in cost of factors of production
• price of related goods
• indirect taxes and subsidies
• future price expectations
• changes in technology
• number of firms

Question 16

joint supply

Answer 16

occurs when two or more goods are derived from the same product

Question 17

price of related goods - supply

Answer 17

• firms can substitute the supply of goods from those earning lower prices to those getting better ones,
• cleary demonstrated by goods that offer joint supply

Question 18

movement along the supply curve

Answer 18

when price changes, ceteris paribus

Question 19

shifts of the supply curve

Answer 19

when any factor affecting supply other than price (non-price determinant) changes

Question 20

equilibrium

Answer 20

state of rest, self-perpetuating in the absence of any outside disturbance

Question 21

market equilibrium

Answer 21

the point where the quantity of a product demanded is equal to the quantity of a product supplied

Question 22

equilibrium price

Answer 22

the price at which the quantity supplied and demanded are equal