Supply and Demand Dynamics in Economics Quiz

Shortage occurs when demand outstrips supply at a specific price level.

Consumers generally demand less of a good as its price rises, adhering to the law of demand.

Surplus occurs when there is an excess of supply over demand at a specific price point.

The price of inputs primarily influences supply, not demand.

A change in the price of the good itself leads to movement along the demand curve, not a shift.

The law of supply dictates that producers are willing to supply more goods at higher prices.

Increase in demand puts upward pressure on price, while decrease in supply leads to a reduction in quantity.

Technological advancements often increase production efficiency, shifting the supply curve to the right.

A rise in the price of a substitute prompts consumers to favor the original product, shifting the demand curve left.

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

A rise in supply leads to a lower price and a higher equilibrium quantity.

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

As oranges become more expensive, consumers shift to apples, driving up both price and quantity in the apple market.

Decreased income reduces demand for luxury cars, leading to lower prices but potentially higher quantity demanded.

Positive cross-price elasticity indicates that the goods are substitutes, meaning an increase in the price of one leads to an increase in demand for the other.

Perfectly elastic demand means consumers will only buy at a specific price, resulting in infinite elasticity.

A negative income elasticity indicates that the good is inferior, meaning demand decreases as consumer incomes rise.

Negative cross-price elasticity indicates that the goods are complementary, meaning an increase in the price of one leads to a decrease in demand for the other.