Understanding Demand and Supply

What does the Law of Demand state?

• The quantity demanded remains constant regardless of price changes.

• Higher prices lead to lower demand for goods.

• As the price decreases, the quantity demanded increases.

• As the price increases, the quantity demanded decreases.

Answer explanation

Remember that price determinant is a movement along the same demand curve. It is not a shift of the entire DD.

How does the Law of Supply differ from the Law of Demand?

• The Law of Supply shows a direct relationship between price and quantity supplied, while the Law of Demand shows an inverse relationship between price and quantity demanded.

• The Law of Supply indicates that higher prices lead to lower quantity supplied.

• The Law of Demand states that quantity supplied increases as price increases.

• The Law of Supply and Demand both show a direct relationship between price and quantity.

What is market equilibrium?

• Market equilibrium is the point where supply equals demand.

• Market equilibrium is the point where supply is greater than demand.

• Market equilibrium occurs when demand exceeds supply.

• Market equilibrium is when prices are set by the government.

What factors can cause a shift in demand?

• Technological advancements in manufacturing

• Factors that can cause a shift in demand include changes in consumer preferences, income levels, prices of related goods and consumer expectations.

• Government regulations on production

• Changes in weather patterns

What are the main reasons for a shift in supply?

• Changes in production costs, technology, government policies, natural disasters, and number of suppliers.

• A rise in Price, motivating profit maximising firms to produce more and hence SS rises.

• Changes in marketing strategies

• Increase in consumer demand

How does technology impact supply?

• Technology reduces supply by complicating production processes.

• Technology has no effect on supply levels.

• Technology decreases supply by increasing production costs.

• Technology increases supply by enhancing production efficiency and reducing costs.

What is price elasticity of demand?

• Price elasticity of demand is a measure of the responsiveness of price to a change in quantity demanded.

• Price elasticity of demand is the ratio of supply to demand.

• Price elasticity of demand measures the total revenue of a product.

• Price elasticity of demand is a measure of the responsiveness of quantity demanded to a change in price.

How do you calculate price elasticity?

• Price Elasticity = (Total Revenue) / (Quantity Sold)

• Price Elasticity = (Change in Price) / (Change in Quantity Demanded)

• Price Elasticity = (% Change in Quantity Demanded) / (% Change in Price)

• Price Elasticity = (Quantity Supplied) / (Price Change)

What does it mean if demand is price elastic?

• Demand is price elastic when a change in price results in a proportionally larger change in quantity demanded.

• Demand is price elastic when it is completely unaffected by price changes.

• Demand is price elastic when quantity demanded remains unchanged regardless of price.

• Demand is price elastic when a change in price results in a smaller change in quantity demanded.

What is the effect of a price ceiling on market equilibrium?

• A price ceiling can lead to a shortage if set below the market equilibrium price.

• A price ceiling has no effect on market equilibrium.

• A price ceiling always results in a surplus of goods.

• A price ceiling increases the market equilibrium price.