Question

Answer all questions given. Answer them with 2 or more sentences.

1. What would happen to equilibrium price and quantity if there were a decrease in demand: (Circle one answer)

A. A decrease in both equilibrium price and quantity

B. A decrease in equilibrium price

C. A decrease in equilibrium quantity

D. Noneoftheabove

2. Define/ Explain Demand: (Short Answer)

3. Shortage can be defined as:

4. Define/ Explain Supply (Short Answer):

5. Define Price ceilings & Price floors (Short Answer):

6. Equilibrium Quantity can be defined as: (Circle one answer)

A. Price Mechanism

B. Quantity demanded equals quantity supplied

C. Quantity sold when quantity demanded equals quantity supplied

D. All of the above

7. What happens to quantity demanded when price is raised? (Short Answer)

8. Define/ Explain Surplus (Short Answer):

9. Equilibrium Price can be defined as: (Circle one answer)

A. Price Mechanism

B. Quantity demanded equals quantity supplied

C. Quality demanded equals quantity supplied

D. All of the above

10. Is the actual price or market price, always equal to the equilibrium price? Why? (Short Answer)

11. Explain the expectation of a consumer when entering a store, and give reason if a demand will occur or not (Short Answer):

Answer 1

1) A decrease in demand would shift the demand curve to left. This would reduce the demand but the price would remain same because factors other than price shift the demand curve. So answer is option C)  A decrease in equilibrium quantity.

2) Demand refers to the willingness and want for a particular good at a particular price at a particular time. Both want and willingness to pay is necessary for a demand . Also as a common notion ( generally ) , the demand for a good would reduce when price increases.

3) Shortage is when the quantity supplied is less than quantity demanded . In such a case the market wont be in equilibrium and the prices would rise , reducing the demand and hence bringing the market to equilibrium.

4) Supply is the availability or making available a good or service at a range of prices or a specific price and a specific time. Generally more will be supplied if the price is higher.

5) Price ceiling is the maximum price set by the government or any such institution above which the goods cannot be traded . It is binding when the price ceiling e is below the equilibrium price.

Price floor is the minimium price set by the government or any such institution below which the goods cannot be traded . It is binding when the price ceiling  is above the equilibrium price.

6) Equilibrium quantity is when the quantity demanded is equal to quantity supplied .So the quantity which is sold and bought at this point is called equilibrium quantity.Option C is not the answer bevause it is not just the quantity sold but demanded as well. Other options are invalid.  hence answer is option B) Quantity demanded equals quantity supplied

7) When a price is raised the quantity demanded reduced . The movement due to a price raise is seen along the demand curve. The movement would be on left on the same curve.

8) Surplus is when the quantity supplied is more than quantity demanded . In such a case the market won't be in equilibrium and the prices would reduce , increasing the demand and hence bringing the market to equilibrium. THe demand would rise because there exists an inverse relation between demand and price of a good.

9) Equilibrium Price can be defined as Quantity demanded equals quantity supplied ie the price at which the quantity supplied and demanded is equal . Both the equilibrium quantity and price is achieved at this point. Option C is wrong because equilibrium price is the price and not quality. So answer is option B)Quantity demanded equals quantity supplied

10) No, actual price or market price is not always equal to equilibrium price . The market price may be more or less than the equilibrium price causing a surplus or shortage in the market .

11) the expectation of a consumer would depend on whether the consumer has the abililty and willingness to pay for the good at a price specified for the particular good. The demand would occur if the price is as per the expectation of consumer and his marginal benefit or utility from the good is same as the cost he is paying . Also not having money is important , the willingness is also important.

(you can comment for doubts )