Topic 3: Demand and Supply

Question 1

It refers to the number or amount of goods and services desired by the consumers at various prices in a particular period of time.

Answer 1

Demand

Question 2

The amount of goods or services are willing and able to buy/purchase at a given price, place, and a period of time.

Answer 2

Quantity demanded

Question 3

Law of Demand

Answer 3

States that as price increases, quantity demanded decreases; and as price decreases, quantity demanded increases (if other factors remain constant).

Question 4

Determinants of Demand

Answer 4

1. Consumer’s income
2. Consumers’ Expectations of Future Prices
3. Prices of Related Products
4. Consumer Tastes and Preferences
5. Population
6. Price

Question 5

Goods that can be used in place of other goods.

Answer 5

Substitute Products

Question 6

Goods that cannot be used without the other.

Answer 6

Complementary Goods

Question 7

Determinant: Affected by religion, culture, traditions, age, trend, technology, and many more.

Answer 7

Consumer Tastes and Preferences.

Question 8

Determinant: Increase in this means more demand for goods and services.

Answer 8

Population

Question 9

Determinant: Demand for any particular good will be affected by changes in the ___________.

Answer 9

Prices of Related Products

Question 10

Determinant: For example, expected increase in the price of gasoline causes panic buying for car owners to maximize the purchasing power of their money.

Answer 10

Consumers’ Expectations of Future Prices

Question 11

Type of Goods: For example, basic necessities such as rice, utilities, medical and dental services.

Answer 11

Normal good

Question 12

Type of Goods: For example, public transportation, reduces the consumption of public utility instead they tend to drive their own car.

Answer 12

Inferior good

Question 13

Type of Goods: Demand increases when income increases and vice versa

Answer 13

Normal good

Question 14

Type of Goods: Demand falls when income rises and vice versa.

Answer 14

Inferior good

Question 15

Representation of the relationship between demand and its determinants expressed using mathematical language.

Answer 15

Demand Function

Question 16

Demand function can be written as follows if all determinants except price are kept constant. (Linear Equation)

Answer 16

Qd = a – bP + e

Question 17

Shows the tabular representation of the relationship between quantity of a good demanded and the price of that good.

Answer 17

Demand Schedule

Question 18

Shows graphically the relationship between the quantity of a good demanded and its corresponding price, with other variables held constant.

Answer 18

Demand Curve

Question 19

Shifting from one demand curve to another. Brought by the changes in the non-price determinants of demand.

Answer 19

Change in Demand

Question 20

Shifting from one demand curve to another. Brought by

Answer 20

The changes in the non-price determinants of demand.

Question 21

Change in the price of goods and services. Movement along a demand curve.

Answer 21

Change in Quantity Demanded

Question 22

Movement along a demand curve. Brought by

Answer 22

Change in the price of goods and services.

Question 23

Defined as the maximum units/quantity of goods and services producers can offer.

Answer 23

Supply

Question 24

It refers to the amount or quantity of goods and services producers are willing and able to supply at a given price, at a given period of time.

Answer 24

Quantity supplied

Question 25

Law of Supply

Answer 25

States that as price increases, quantity supplied also increases; and as price decreases, quantity supplied also decreases.

Question 26

Determinants of Supply

Answer 26

1. Change in technology
2. Cost of inputs used
3. Expectation of future prices
4. Price of related goods
5. Government regulation and taxes
6. Government subsidies
7. Number of firms in the market

Question 27

Mathematical expression of the
relationship between price and quantity supplied.

Answer 27

Supply Function

Question 28

A linear equation can also be created using the simplified functional expression. (Supply Equation)

Answer 28

Qs = a+ bP + e

Question 29

Shows the tabular representation of the relationship between the quantity of a good supplied and its price.

Answer 29

Supply Schedule

Question 30

Shows the relationship between the quantity of a good supplied and its price, with other variables held constant.

Answer 30

Supply Curve

Question 31

What will happen when supply and demand intersect?

Answer 31

When demand and supply intersect, it creates equilibrium price and equilibrium quantity, or the market equilibrium.

Question 32

A condition in the market where the quantity supplied is more than quantity demanded.

Answer 32

Surplus

Question 33

A condition in the market in which quantity demanded is higher than supplied.

Answer 33

Shortage

Question 34

It is the legal minimum price imposed by the government.

Answer 34

Floor price

Question 35

It is the legal maximum price imposed by the government.

Answer 35

Price ceiling