Supply And Demand

Question 1

Supply and demand model

Answer 1

Model of how a competitive market behaves

Question 2

What are the five key elements of a supply and demand model?

Answer 2

1. Demand curve
2. Supply curve
3. Set of factors that cause the demand curve to shift and the set of factors that cause the supply curve to shift
4. Market equilibrium
5. The way the market equilibrium changes when the supply curve or demand curve shifts

Question 3

Demand schedule

Answer 3

Table showing how much of a good consumers will want to buy at different prices

Question 4

Quantity demanded

Answer 4

Actual amount of a good/service consumers are willing to buy at some specific price

Question 5

Demand curve

Answer 5

Graphical representation of the demand schedule, it shows the relationship between quantity demanded and price

Question 6

Law of demand

Answer 6

Says that a higher price for a good /service, other things equal, leads people to demand a smaller quantity of that good/service

Question 7

Shifts of the demand curve

Answer 7

Change in ten quantity at any given price, represented by the shift of the original demand curve to a new position, denoted by a new demand curve

Question 8

Movement along the demand curve

Answer 8

Change in the quantity demanded of a good arising from a change in the goods price

Question 9

What are the 5 principle factors that shift the demand curve for a good/service

Answer 9

1. Changes in the prices of related goods/services
2. Changes in income
3. Changes in tastes
4. Changes in expectation
5. Changes in number of consumers

Question 10

Substitutes

Answer 10

If a rise in the price of one of the goods leads to an increase in demand for the other good

Question 11

Complements

Answer 11

If a rise in the price of one good leads to a decrease in demand for the other good

Question 12

Normal good

Answer 12

Demand for these increase when consumer income rises

Question 13

Inferior goods

Answer 13

When a rise in income decreases the demand for the good

Question 14

Individual demand curve

Answer 14

Illustrates the relationship between quantity demanded and price for an individual consumer

Question 15

Quantity supplied

Answer 15

Actual amount of a food or service people are willing to sell at some specific price

Question 16

Supply schedule

Answer 16

Shows how much of a good/service should be supplied at different prices

Question 17

Supply curve

Answer 17

Shows the relationship between quantity supplied and price

Question 18

Shift of the supply curve

Answer 18

A change in the quantity supplied of a good/service at any given price

Question 19

Movement along the supply curve

Answer 19

A change in the quantity supplied of a good arising from a change in the goods price

Question 20

Input

Answer 20

A good/service used to produce another good/service

Question 21

Individual supply curve

Answer 21

Illustrates the relationship between quantity supplied and price for an individual producer

Question 22

Equilibrium quantity

Answer 22

Quantity of the good/service bought and sold at that price

Question 23

Market price

Answer 23

All sellers receive and all buyers pay approximately the same price

Question 24

Surplus

Answer 24

When the quantity supplied exceeds the quantity demanded - occurs when the price is above the equilibrium level

Question 25

Shortage

Answer 25

When the quantity demanded exceeds the quantity supplied -occur when the price is below its equilibrium level

Question 26

Competitive market

Answer 26

There are many buyers and sellers of the same good/service, none of whom can influence the price at which the good/service is sold