Unit 3; Supply and Demand

Question 1

Law of Demand

Answer 1

When price increases, quantity demanded decreases
When price decreases, quantity demanded increases

Question 2

Law of Supply

Answer 2

When price increases, quantity demanded increases
When price decreases, quanitity demanded decreases

Question 3

Normal Good

Answer 3

As income increase, demand for these goods also increases

Question 4

Inferior Good

Answer 4

As income increases, demand for these goods decreases

Question 5

Substitutes

Answer 5

Products that can easily replace another product

Question 6

Complements

Answer 6

Products that are used in conjunction with another product

Question 7

Elasticity

Answer 7

Measures how responsive one economic variable is to changes in another

Question 8

Inputs

Answer 8

Factors of production that producers must pay to make their good or service

Question 9

Subsidies

Answer 9

When the government gives money directly to a business so that they can function

Question 10

Excise Taxes

Answer 10

A tax on a specific good

Question 11

Market Equilibrium

Answer 11

The price at which buyers and sellers agree because quantity supplied equals quantity demanded

Question 12

Shortage

Answer 12

If the price is too low, as the product sells out quickly and sellers could have raised the price and made more money

Question 13

Surplus

Answer 13

If the price is too high, as the product doesn’t sell very well and too much product stays on the shelves, not making money for the seller

Question 14

Price Ceiling

Answer 14

Maximum price for a good or service in a specific market

Question 15

What happens to the supply and demand curves when the price changes?

Answer 15

When prices change, the supply and demand also change.

Question 16

What happens to the supply and demand curves when there is a change in supply or a change in demand?

Answer 16

When there is a change in supply or demand, the other changes, as well as price.

Question 17

What factors can cause a change in demand?

Answer 17

Some factors that was cause a change in demand are price, consumer income, price of related goods, consumer tastes, consumer expectations, and number of buyers.

Question 18

What are two examples that might cause the demand curve to shift to the left?

Answer 18

Increase in price, consumer income

Question 19

What are two examples that might cause the demand curve to shift to the right?

Answer 19

Decrease in price, number of buyers

Question 20

What factors cause a change in supply?

Answer 20

Cost of inputs, natural disasters

Question 21

What are two examples that might cause the supply curve to shift to the left?

Answer 21

Higher cost of inputs, less sellers

Question 22

What are two examples that might cause the supply curve to shift to the right?

Answer 22

More sellers, lower cost of inputs

Question 23

What are two examples that might cause the supply curve to shift to the left?

Answer 23

Less sellers, natural disasters

Question 24

What happens to the demand for normal goods when the economy is doing well?

Answer 24

Demand for normal goods go up

Question 25

What happens to the demand for normal goods when the economy is doing poorly?

Answer 25

Demand for normal goods goes down

Question 26

If the price of steek used in car production decreased, what would happen to the supply and demand curve for cars?

Answer 26

The supply would go up and the demand would go down

Question 27

The price for snorkeling gear increases. If snorkeling gear and swimsuits are complements, when happens to the market for swimsuits?

Answer 27

The price of swimsuits goes up, the supply goes up, and the demand goes down.

Question 28

If the government announces today that a tax increase of 25 cents on a can of soda is to take place in a month, what would you expect to happen to happen today to the current market for soda?

Answer 28

Either nothing or demand would go up due to people stocking up on sodas.

Question 29

Who generally benefits from price floors?

Answer 29

Sellers

Question 30

What is an example of a price floor?

Answer 30

Minimum wage

Question 31

Who generally benefits from price ceilings?

Answer 31

Buyers

Question 32

What is an example of a price ceiling?

Answer 32

Rent control