Supply and Demand Fundamentals
Explore the fundamental principles of supply and demand, including definitions, determinants, and market equilibrium.
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Supply and Demand Fundamentals
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Read each question carefully and provide your best answer based on your understanding of supply and demand principles.
1. Which of the following best describes the Law of Demand?
As price increases, quantity supplied increases.
As price increases, quantity demanded decreases.
As income increases, quantity demanded decreases.
As production costs decrease, supply decreases.
2. What happens to the equilibrium price and quantity when demand increases and supply remains constant?
Price decreases, quantity decreases.
Price increases, quantity decreases.
Price increases, quantity increases.
Price decreases, quantity increases.
3. The point where the supply and demand curves intersect is known as .
4. A decrease in the cost of production will generally lead to an in supply.
5. Explain the difference between a change in quantity demanded and a change in demand.
6. An increase in consumer income will always lead to an increase in demand for a product.
True
False
Match each term on the left with its definition on the right.
7. Supply
a. The amount of a good or service that consumers are willing and able to purchase at various prices.
8. Demand
b. The amount of a good or service that producers are willing and able to offer for sale at various prices.
9. Equilibrium
c. A situation in which quantity demanded exceeds quantity supplied.
10. Shortage
d. The price and quantity at which quantity demanded equals quantity supplied.