Supply and Demand

Question 1

Quantity Demanded

Answer 1

The total number of units purchased at the specific price

Downward sloping line

Question 2

Quantity Supplied

Answer 2

The total number of units supplied at the specific price

Upward sloping line

Question 3

Demand Schedule

Answer 3

The table/graph that shows quantities demanded at each price

Question 4

Law of Supply

Answer 4

Higher price leads to a higher quantity supplied. Lower price leads to a lower quantity supplied.

Question 5

Law of Demand

Answer 5

Higher price leads to a lower quantity demanded. Lower price leads to a higher quantity demanded.

Question 6

Surplus

Answer 6

Price above equilibrium leads to greater supply and less demand

Question 7

Shortage

Answer 7

Price below equilibrium leads to greater demand and less supply

Question 8

Factors Affecting Demand

Answer 8

Income

Price of Substitutes/Compliments

Number of Consumers

Consumer Preference

Consumer Expectation

Question 9

Factors Affecting Supply

Answer 9

Price

Number of Suppliers

Technology

Government Taxes/Subsidies

Seller Expectations

Question 10

Complimentary Good

Answer 10

As demand for product A increases demand for product B increases

Question 11

Substitute

Answer 11

As demand for product A increases demand for product B decreases

Question 12

Normal Good

Answer 12

As income rises demand for the good rises

Question 13

Inferior Good

Answer 13

As income rises demand for the good decreases

Question 14

Change in Qd

Answer 14

A movement along the demand curve

Question 15

Shift in Qd

Answer 15

A movement/shift of the entire demand curve

Question 16

Change in Qs

Answer 16

A movement along the supply curve

Question 17

Shift in Qs

Answer 17

A movement/shift of the entire supply curve

Question 18

Price Ceiling

Answer 18

Max price

Creates shortage since D>S

Question 19

Price Floor

Answer 19

Minimum price

Creates surplus since S>D

Question 20

Deadweight Loss

Answer 20

Loss in social surplus when the price is higher than equilibrium

Question 21

Producer Surplus

Answer 21

The amount gained from selling a price higher than the supplier was willing to accept

Question 22

Consumer Surplus

Answer 22

Benefit to consumer from buying a good at a lower price than they were willing to spend

Question 23

What happens to the price and quantity bought and sold in the cocoa market if there is a drought and the same time a study releases about the health benefits of cocoa?

Answer 23

The drought will cause an upward shift (left towards y-axis) in supply as crops will be destroyed.

The study will create a demand shift to the left as overall demand increases.

As supply decreases the prices will increase. As demand increases it will cause a secondary increase in price and quantity sold.