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ECON 705: Module 1 - Ch. 2 Supply And Demand Latest 2023 /Questions And Answers
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ECON 705: Module 1 - Ch. 2 Supply And Demand Latest 2023 /Questions And Answers
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ECON 705: Module 1 - Ch. 2 Supply And DemandLatest 2023 /Questions And Answers
Quiz :Market - Answer :Any arrangement that brings together buyers and
sellers
Quiz :Law of Demand - also known as? - Answer :-Pertains to market not
individual demand
-Quantity demanded of a good or service is inversely related to its price known
as ceteris paribus
Quiz :Income Effect - Answer :As a product's price declines a buyer's real
purchasing power increases
Quiz :Substitution Effect - Answer :When there is no change in purchasing
power, if a price of a good increases buyers will unambigiously switch their
purchase to to a relatively less expensive substitute
Quiz :How does a change in demand differ from a change in the quantity
demanded? Explain conceptually and graphically. - Answer :-A change in
demand shifts the entire demand curve which is caused by preferences,
income, prices of substitutes, expectations, population, etc.
-A change in the quantity demanded refers to movement along the demand
curve which is caused only by the change in price
Quiz :How does an increase in money income affect demand for a good? -
Answer :An increase in income will increase the demand for most goods and
services
Quiz :What is the difference between a normal good and inferior good? -
Answer :-Normal Good: demand for good increases as income increases
-Inferior Good: demand for good decreases as income increases
Quiz :How do changes in tastes and preferences affect demand for a good? -
Answer :-An increase in advertising/preference for product will shift demand
curve to the right
Quiz :Substitutes - Answer :An increase in the price of good Y will cause some
consumers to shift their purchases to relatively less expensive good X
i.e. moving from margarine to butter
, Quiz :Complements - Answer :-Goods that are bought and consumed together
i.e. tennis balls and tennis rackets
Quiz :What happens to Complement goods X and Y if a decrease in price of
good X happens? - Answer :-Increase in quantity demanded for Good Y
-Increase in the demand for Good X
Quiz :If the demand curve represents the maximum price a consumer is willing
to pay for a good, what is the difference between the total price paid by the
consumer and the price received by the seller if a sales tax is added? -
Answer :
Quiz :How does a change in the number of consumers in the market affect
market demand? - Answer :Increase in number of consumers will shift
demand curve to the right
Quiz :What does Px represent? M represent? Py represent? - Answer :Px =
price
M = income
Py = price of related good Y
Quiz :What are the expected signs of the coefficients: βx?βM?βy? -
Answer :βx < 0 by law of demand
βM > 0 if normal, βM < 0 if inferior
βy > 0 if substitute, βy < 0 if complement
Quiz :What does consumer surplus measure? - Answer :Value that buyers
received from purchase of good or service in excess of the amount paid
Quiz :What is the law of supply? - Answer :Quantity supplied of a good or
service is directly related to a change in its market price
Quiz :What are the factors that determine the total supply of the good? -
Answer :-Input prices
-Production technology
-Taxes and government regulation
-Prices of related goods
-Number of firms in industry
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