Introduction to Supply and Demand quiz #1 Flashcards
Introduction to Supply and Demand quiz #1
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What is the equilibrium level of output in a perfectly competitive market? The equilibrium level of output is the quantity at which the market demand equals market supply, resulting in no tendency for price or quantity to change. Increasing which of the following will cause an increase in market demand in a perfectly competitive market? Increasing consumer income, the number of buyers, or consumer preference for the product will cause an increase in market demand. What is one result of a decrease in market demand in a perfectly competitive market? A decrease in market demand leads to a lower equilibrium price and a lower equilibrium quantity. Which line represents the supply curve in a perfectly competitive market? The upward-sloping line represents the supply curve, showing the relationship between price and quantity supplied. An increase in the price of a product causes the market demand curve to shift in which direction? An increase in the price of a product does not shift the demand curve; it causes movement along the demand curve. What do supply and demand graphs in introductory macroeconomics illustrate? Supply and demand graphs illustrate the relationship between price and quantity for a product, showing how equilibrium is determined in a market. What does the horizontal axis of the supply and demand model measure? The horizontal axis of the supply and demand model measures the overall quantity of the product being bought and sold in the market. What does it mean for buyers and sellers to be 'price takers' in a perfectly competitive market? It means that neither buyers nor sellers can influence the market price; they must accept the price determined by the overall market. Why are agricultural products like wheat often used as examples of perfectly competitive markets? Because the goods are indistinguishable from one seller to another and there are many buyers and sellers, making it hard for anyone to influence the price. What is the purpose of using the concept 'ceteris paribus' in economic analysis? It allows economists to isolate the effect of one variable by holding all other relevant factors constant during analysis.
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