ECONOMICS: Chapter 7 Questions - Supply & Demand						

7.1: Demand and Supply

1. Write a definition for demand.

2. Write a definition for supply.

3. This represents the process of freely exchanging goods/services between buyers and sellers.

4. What does the law of demand state?

5. If the price of a good rises, quantity demanded usually does what?

6. Explain the real income effect?

7. This is the economic rule stating that if two items satisfy the same need and the price if one goes up,
   people will buy the other.
 
8. The ability of a good/service to satisfy a consumer’s wants is its ____________________________.

9. Explain the concept of Diminishing Marginal Utility and give an example.

10. The quantity demanded of a good/service is affected by _________________________________________.

7.2: The Demand Curve and Elasticity of Demand

11. Describe the slope of a demand curve.

12. 	According to this demand curve, how many t-shirts will be demanded at a price of $12?  $16?

13. According to this demand curve, if the price of t-shirts increases from $16 to $18, what will happen to the
    quantity demanded?
14. Describe the five determinants of demand.

15. What would happen to the Demand curve in each of the following situations?

a.	A decrease in income
	
b.	An increase in population
	
c.	An increase in the price of a substitute
	
d.	A decrease in the price of a complement
	
e.	An increase in popularity

16. Explain what occurred in the graph below and what could have caused the change.

17. Explain complimentary goods and give an example.

18. This is the economic concept dealing with consumers’ responsiveness to a change in the price of a product?

19. Explain elastic demand and list several examples.

20. Explain inelastic demand and list several examples.

21. What affects demand elasticity?

7.3: The Law of Supply and the Supply Curve

22. What does the law of supply state?
23. According to the law of supply, higher prices prompt producers to do what?

24. 	Describe the slope of a supply curve. 

	25. According to this supply curve above, 600 t-shirts will be supplied at what price?  1,000?

26. 	According to this supply curve above, if the price of t-shirts decreases from $14 to $12, what will happen to
    the quantity supplied?

27. 	Explain the four factors that could cause the movement shown in graphs A and C above.

28. 	Graphs A and C represent a change in what?

29. The law of diminishing returns states that as additional units of production are added, at some point the total
    amount of output will do what?

Sec. 4: Putting Supply and Demand Together

30. This represents the price at which the amount producers are willing to supply is equal to the amount 
    consumers are willing to buy?

31. This is a situation in which the quantity demanded is greater than the quantity supplied.

32. This is a situation in which quantity supplied is greater than quantity demanded.

33. How is Equilibrium Price determined?

34. If the price of a product is above its equilibrium price, the result is a _______________________________.

35. 	If the price of a product is below its equilibrium price, the result is a _______________________________.

36. 	If the price of a product is above its equilibrium price, the result is a _______________________________.

37. What is a price ceiling? Give an example.

38. What is a price floor? Give an example.

39. Explain rationing.

40. Describe the black market.