Economics: Supply and Demand

What is the law of demand?

• The law of scarcity

• The law of demand states that as the price of a good or service increases, the quantity demanded decreases, and vice versa.

• The law of equilibrium

• The law of supply

Explain the difference between a movement along the demand curve and a shift in the demand curve.

• A movement along the demand curve is caused by a change in supply, while a shift in the demand curve is caused by a change in government regulations.

• A movement along the demand curve is caused by a change in quantity, while a shift in the demand curve is caused by a change in income.

• A movement along the demand curve is caused by a change in consumer preferences, while a shift in the demand curve is caused by a change in technology.

• A movement along the demand curve is caused by a change in price, while a shift in the demand curve is caused by factors other than price.

How does a decrease in the price of a good affect the quantity demanded?

• The quantity demanded decreases.

• The quantity demanded increases.

• The quantity demanded remains the same.

• The quantity demanded becomes negative.

Define the law of supply.

• As the price of a good or service decreases, the quantity supplied by producers decreases

• Producers always supply an infinite quantity of goods regardless of price

• As the price of a good or service increases, the quantity supplied by producers increases, and vice versa.

• The law of supply only applies to services, not goods

What factors can cause a shift in the supply curve?

• Changes in demand, weather conditions, consumer preferences

• Global economic trends, exchange rates, inflation

• Labor strikes, advertising campaigns, interest rates

• Changes in production costs, technology, government policies, taxes, subsidies, and the number of suppliers.

Describe the concept of equilibrium price.

• Equilibrium price is the price at which the market is in a state of constant change.

• Equilibrium price is the price at which the quantity demanded by consumers equals the quantity supplied by producers in a market.

• Equilibrium price is the price at which producers set the price without considering consumer demand.

• Equilibrium price is the price at which the quantity demanded exceeds the quantity supplied.

What happens to price and quantity when there is excess demand in the market?

• Price decreases, quantity demanded exceeds quantity supplied.

• Price increases, quantity demanded exceeds quantity supplied.

• Price remains constant, quantity demanded exceeds quantity supplied.

• Price increases, quantity supplied exceeds quantity demanded.

How does a change in consumer preferences impact the demand curve?

• A change in consumer preferences only affects the supply curve

• A change in consumer preferences can shift the demand curve either to the left or right depending on whether the preferences have increased or decreased for the product.

• A change in consumer preferences has no impact on the demand curve

• A change in consumer preferences always shifts the demand curve to the right

Explain the concept of elasticity of demand.

• Elasticity of demand measures the total revenue generated from a product.

• Elasticity of demand refers to the quantity supplied in response to a change in price.

• Elasticity of demand is a concept that measures the responsiveness of quantity demanded to a change in price.

• Elasticity of demand is only applicable to luxury goods.

What is the relationship between price elasticity and total revenue?

• Inverse relationship

• Direct relationship

• Positive relationship

• No relationship