1.4 Supply and Demand

• The Law of Demand states that as the price of a good or service increases, the quantity demanded decreases
• What type of relationship does the Law of Demand illustrate between price and quantity demanded?

  Inverse
• Supply and demand both depend on the price of the good or service.


  True
• As consumer income increases, the demand for normal goods rises
• What is one factor, in addition to price, that can affect demand?

  Consumer income
• The Law of Supply states that as the price of a good increases, the quantity supplied increases
• Compare the relationships described by the Law of Demand and the Law of Supply:

  1️⃣ Law of Demand: Inverse relationship between price and quantity demanded

  2️⃣ Law of Supply: Direct relationship between price and quantity supplied
• An increase in the number of consumers shifts the demand curve to the left.

  False
• Understanding supply determinants is crucial for businesses to respond to market changes.

  True
• An increase in the number of producers in the market will increase the total supply
• Market equilibrium is the point where the quantity demanded equals the quantity supplied
• At the equilibrium point, there is no tendency for the price to change.

  True
• Steps for analyzing market shifts using a supply and demand diagram

  1️⃣ Identify the initial equilibrium

  2️⃣ Determine the change in supply or demand

  3️⃣ Shift the appropriate curve

  4️⃣ Find the new equilibrium

  5️⃣ Analyze the effects on price and quantity
• The Law of Supply illustrates a direct relationship between price and quantity supplied.


  True
• Steps to understand the Law of Demand:

  1️⃣ Define the Law of Demand

  2️⃣ Explain its inverse relationship

  3️⃣ Highlight its importance
• Match the Law with its correct description:

  Law of Demand ↔️ Inverse relationship between price and quantity demanded

  Law of Supply ↔️ Direct relationship between price and quantity supplied
• What happens to the demand for complements when their price increases?

  Decreases
• As the price of a substitute increases, the demand for the original good rises
• The Law of Demand illustrates an inverse relationship between price and quantity demanded.


  True
• What are two factors, in addition to price, that can affect demand?

  Consumer income, preferences
• How do input prices affect supply?

  Increase input prices decrease supply
• What happens to the supply curve if the prices of inputs increase?

  Shifts leftward
• What are two examples of government policies that can affect supply?

  Subsidies and price controls
• What are the two primary effects of changes in supply and demand on market equilibrium?

  Equilibrium price and quantity
• What happens to the equilibrium price and quantity if demand increases?

  Price rises, Quantity rises
• What are two examples of factors that can cause a market shift?

  Rising consumer incomes and new technology
• What does demand in economics refer to?

  Quantity consumers are willing to purchase
• Match the concept with its definition:

  Supply ↔️ Quantity producers are willing to offer at different prices

  Demand ↔️ Quantity consumers are willing to purchase at different prices
• The Law of Demand describes an inverse relationship between price and quantity demanded.
• What type of relationship does the Law of Supply illustrate between price and quantity supplied?

  Direct
• An increase in the number of consumers leads to a rightward shift in the demand curve.


  True
• What is demand in economics?

  Willingness to purchase
• Match the economic concept with its explanation:

  Law of Demand ↔️ Inverse relationship between price and quantity demanded

  Price ↔️ Amount consumers pay for a good or service
• As consumer income increases, the demand for inferior goods falls
• Improvements in technology can increase supply by allowing producers to make more with the same resources
• Improvements in production technology can increase supply by allowing producers to make more with the same resources.


  True
• Changes in supply determinants shift the supply curve independently of changes in the good's own price.


  True
• Match the change with its effect on equilibrium price and quantity:

  Increase in Demand ↔️ Price rises, Quantity rises

  Decrease in Demand ↔️ Price falls, Quantity falls

  Increase in Supply ↔️ Price falls, Quantity rises

  Decrease in Supply ↔️ Price rises, Quantity falls
• An increase in supply leads to a lower equilibrium price
• Understanding market shifts is crucial for businesses to make informed pricing and production decisions.


  True