Question 1

The Law of Demand states that, other things being equal, as the price of a good increases, its quantity demanded?

Accepted Answer

Decreases. The Law of Demand describes an inverse relationship between price and quantity demanded. When prices rise, consumers generally reduce their consumption of that specific good. This fundamental principle assumes that factors like income and preferences remain unchanged.

Question 2

What is the shape of a normal demand curve in a graph where price is on the Y-axis and quantity is on the X-axis?

Accepted Answer

Downward sloping. A typical demand curve slopes downward from left to right. This visual representation confirms the inverse relationship established by the law of demand. The negative slope indicates that lower prices attract a higher volume of purchases.

Question 3

According to the Law of Supply, a producer will offer more of a product for sale when its price?

Accepted Answer

Rises. The Law of Supply establishes a direct relationship between price and quantity supplied. Higher prices provide a greater profit incentive for firms to increase their production levels. This principle assumes that production costs and technology remain constant during the period.

Question 4

Which term describes a situation where the quantity demanded equals the quantity supplied at a specific price?

Accepted Answer

Equilibrium. Market equilibrium occurs when the intentions of buyers and sellers perfectly coincide. At this point, there is no inherent pressure for the price to change further. It represents a state of balance where market forces are satisfied.

Question 5

Goods that are used together, such as cars and petrol, are known as?

Accepted Answer

Complementary goods. Complementary goods exhibit an inverse cross-price elasticity of demand. If the price of one increases, the demand for its companion good typically falls. These goods are usually consumed as a single unit or package.

Demand & Supply — Set 1