Market Forces: Demand and Supply Analysis Quiz

Factors affecting demand include consumer income, preferences, expectations, and prices of related goods.

The law of demand asserts an inverse relationship between price and quantity demanded in a given time period.

Price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price.

The law of supply states a positive correlation between price and quantity supplied in a given time period.

Market equilibrium is the state where the quantity demanded by consumers equals the quantity supplied by producers.

Substitute goods are interchangeable, as consumers can use one in place of another.

Reduced taxes on production can incentivize suppliers, shifting the supply curve to the right.

Market equilibrium is reached when the quantity demanded by consumers matches the quantity supplied by producers.

Price ceilings limit the price a good or service can be sold for, set below the market equilibrium.

A rightward shift in the demand curve signifies a rise in demand, caused by factors beyond price.

Price floors set a minimum price for a good or service, often leading to an excess supply.

Normal goods experience increased demand as consumer incomes rise.

Determinants of supply include input costs, technology, expectations, and the number of sellers, not buyers.

Price elasticity of demand gauges how much quantity demanded changes in response to a percentage change in price.

Perfectly elastic demand means consumers will buy any quantity at a specific price, resulting in a horizontal demand curve.

Cross-price elasticity measures how the quantity demanded of one good responds to changes in the price of another.

Income elasticity of demand assesses how quantity demanded changes with variations in consumer income.

Giffen goods defy the law of demand, exhibiting higher demand as prices rise, often due to unique circumstances.