Supply and Demand

Question 1

What is demand?

Answer 1

Demand is the quantity of a good or service that buyers are willing and able to buy at a given price.

Question 2

When price goes up, demand…….

Answer 2

…..contracts

Question 3

When price goes down, demand…..

Answer 3

…..expands

Question 4

What are Veblen goods?

Answer 4

High-status items that people want because they are expensive and popular and therefore exclusive.

Question 5

What are Giffen goods?

Answer 5

A non-luxury product for which demand increases as the price increases and vice versa, thus defying the laws of demand.

Question 6

What are the two exceptions to the law of demand?

Answer 6

Veblen goods and Giffen goods.

Question 7

What are the factors that affect demand?

Answer 7

PASIFIC
1. Population
2. Advertising
3. Substitutes
4. Interest rates
5. Fashion and Trends
6. Income
7. Complements

Question 8

What is Population in the factors of demand?

Answer 8

The amount of people that live in a country. If the population increases, there will be more people who will buy a certain product. If it decreases, then there would be less people to buy that certain product.

Question 9

What is Advertising in the factors of demand?

Answer 9

When a company publicizes its product. If a company advertises its product, many people would start knowing about it and would then buy it. Thus, there would be an outward shift in demand.

Question 10

What is Substitutes in the factors of demand?

Answer 10

Something that replaces a product. If the price of a normal product increases, people would look to buy a substitute that costs less. If there is a substitute, then there would be a huge demand for it.

Question 11

What is Interest rates in the factors of demand?

Answer 11

Credit for saving and the cost of borrowing. If interest rates are increased, it would increase credit for saving and the cost of borrowing also increases. More people would start saving and demand would get lower.

Question 12

What is Fashion and Trends in the factors of demand?

Answer 12

Items that are fashionable and trendy now. If a certain product is trending right now, there would be a higher demand for it and would show an outward shift in demand.

Question 13

What is Income in the factors of demand?

Answer 13

A person’s wage or salary from working. If a person’s income increases, they have more purchasing power and can buy more products. Thus, demand would then shift outwards. If income decreases, then demand would shift inwards.

Question 14

What is Complements in the factors of demand?

Answer 14

Something that comes with a certain product. If the price of the compliment increases, fewer people would buy it and the demand would shift inwards. For example. ketchup is a compliment for fries. If the price of ketchup increases, then people would not buy the fries nor the ketchup.

Question 15

What is supply?

Answer 15

Supply is the quantity producers are willing to and able to produce at any given price in any given time.

Question 16

What are the factors that affect supply?

Answer 16

PINTSWC
1. Productivity
2. Indirect taxes
3. Number of firms
4. Technology
5. Subsidies
6. Weather
7. Cost of Production

Question 17

What is Productivity in factors of supply?

Answer 17

Productivity is output per worker. If firms become more productive, this means that more output is produced per worker. Consequently, with the same number of workers, firms can produce more. If they produce more, then this means that they can bring more products to market and therefore, supply would shift outwards.

Question 18

What are Indirect Taxes in factors of supply?

Answer 18

An indirect tax is a tax on a good or service. If the government levies an indirect tax, this means that the cost of production would increase. This therefore means that if it costs more, firms would be able to produce less with the same amount of money. Consequently, supply would shift inwards when the indirect taxes are levied.

Question 19

What is Number of Firms in factors of supply?

Answer 19

Number of firms is the number of businesses which operate within a market. The more number of firms there are, the more competitors there would be. If there are more competitors, firms would have to

Question 20

What are Technologies in factors of supply?

Answer 20

Technology can be defined as capital or machinery. If firms use technology as a means to produce products, this means that supply would shift outwards. This is because technology can work longer and more efficiently than humans can as there is a limit to how much a human can work due to government legislation.

Question 21

What is Subsidies in factors of supply?

Answer 21

Subsidies are defined as a payment by a third party, usually the government to reduce the cost of production. If a subsidy is provided, this reduces the cost of production. Because the cost of production is reduced, this means that firms can produce more with the same amount of money, thus shifting supply outwards

Question 22

What is Weather in factors of supply?

Answer 22

Weather is the meteorological conditions that affect the supply of a product. If weather aids/helps supply, then supply should shift outwards because firms can bring products to markets easily. If the weather worsens supply, then firms would find it difficult to bring products to market and therefore would shift inwards.

Question 23

What is the Cost of Production in factors of supply?

Answer 23

Cost of Production refers to the money required to produce/make a product. If the cost of production increases, this means that firms can produce less with the same amount of money. If the cost of production decreases, this means that firms can produce more with the same amount of money and that would shift supply outwards.

Question 24

When the price goes up, the supply….

Answer 24

…..would expand

Question 25

When the price goes down, the supply……

Answer 25

…..would contract

Question 26

What is a direct tax?

Answer 26

A tax on a person or an organization. A tax on a person means they have less income and so their demand shifts