Demand and Supply

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Q1. What is the term for a situation where quantity demanded is greater than quantity supplied?

Solution:

A shortage occurs when the quantity demanded exceeds the quantity supplied at a given price.

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Q2. Which of the following is NOT a determinant of supply?

Solution:

Consumer income is a determinant of demand, not supply.

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Q3. What effect does an increase in consumer preferences for a product have on its demand?

Solution:

An increase in consumer preferences for a product typically leads to an increase in demand for that product.

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Q4. What is the term for the point where the supply and demand curves intersect?

Solution:

The point where the supply and demand curves intersect is called the equilibrium, where quantity supplied equals quantity demanded.

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Q5. If there is a surplus of a product in the market, what is likely to happen to its price?

Solution:

In the case of a surplus, suppliers will lower the price to encourage more sales, leading to a decrease in price.

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Q6. If the price of a substitute good increases, what happens to the demand for the original good?

Solution:

If the price of a substitute good increases, consumers will likely buy more of the original good, increasing its demand.

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Q7. What is a market equilibrium?

Solution:

Market equilibrium occurs when the quantity supplied equals the quantity demanded at a certain price.

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Q8. What is the term for a market structure with many buyers and many sellers?

Solution:

Perfect competition is characterized by many buyers and many sellers in the market.

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Q9. What happens to the demand for a product when its price decreases?

Solution:

When the price of a product decreases, consumers are generally more willing to buy more of it, leading to an increase in demand.

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Q10. If the supply of a good decreases while demand remains constant, what happens to the equilibrium price?

Solution:

If supply decreases while demand remains constant, there will be a shortage, leading to an increase in the equilibrium price.