Topic 1

Question 1

Markets

Answer 1

Interactions between buyers and sellers.

Question 2

Markets may be:

Answer 2

1. Local
2. National
3. International

Question 3

How is price discovered?

Answer 3

Price is discovered in the interaction of buyers and sellers.

Question 4

Demand

Answer 4

A schedule or curve that shows the various amounts of a product that consumers are willing and able to purchase at each of a series of possible prices during specific periods of time.

Question 5

Demand schedule

Answer 5

Table

Question 6

Demand curve

Answer 6

Graph

Question 7

Demand scheduled or
demand curve.

Answer 7

Amount consumers are willing and able to purchase at a given price, assuming:
1. Other things equal.
2. Individual demand
3. Market demand

Question 8

Law of demand

Answer 8

Other things equal as price falls, the quantity demand rises, and as price rises, the quantity demand falls.

Question 9

Law of demand explanations.

Answer 9

1. Price acts as an obstacle to buyers
2. Law of diminishing marginal utility.
3. Income effect and substitution effect.

Question 10

Determinence of demand

Answer 10

It also causes a change of demand by having a shift in the demand curve.
1. Change in consumer taste and preferences.
2. Change in the number of buyers.
3. Change in income
4. Change in prices of related goods.
5. Change in customer expectations

Question 11

Change in income

Answer 11

1. Normal goods
2. Inferior goods

Question 12

Change in prices of related goods

Answer 12

1. Complementary good
2. Substitute goods

Question 13

Change in customer expectations

Answer 13

1. Future prices
2. Future income

Question 14

Supply

Answer 14

A schedule or curve that shows the various amounts of a product that producers are willing and able to make available for sale at each of a series of possible prices during a specific period of time.

Question 15

Supply schedule or supply curve

Answer 15

Amount producers are willing and able to sell at a given price
1.Individual supply
2.market supply.

Question 16

Law of supply.

Answer 16

Other things equal as the price rises, the quantity supplied rises and as the price falls, the quantity supply falls

Question 17

Law of supply explanation.

Answer 17

1. Price acts as an incentive to producers.
2. At some point costs will rise.

Question 18

Determinants of supply.

Answer 18

Change in:
1.Resource prices
2.technology
3. Number of sellers
4. Taxes and subsidies
5. Price of other goods
6. Producers expectations

Question 19

Market equilibrium

Answer 19

Equilibrium occurs when the demand curve and the supply curve intersect

Question 20

Productive efficiency

Answer 20

1. Producing goods in the least costly way
2. Using the best technology
3. Using the right mix of resources.

Question 21

Allocative efficiency

Answer 21

1. Producing the right mix of goods 2. The combination of goods most highly valued by society

Question 22

Rationing function of prices

Answer 22

The ability of the competitive forces of demand and supply to establish a price at which selling and buying decisions are consistent

Question 23

Price ceiling

Answer 23

1. Set a low equilibrium price
2. rationing problem
3. black markets
   Example Rent control

Question 24

Price floor

Answer 24

1. Prices are set above the market price.
2. Chronic surplus
   Example is minimum wage law.

Question 25

Change in quantity demand

Answer 25

Movement along the curve on the graph only thing that affects it is price.

Question 26

Surplus

Answer 26

Quantity supply is greater than the quantity demand.

Question 27

Shortage

Answer 27

Quantity demand is greater than quantity supply