Question

1. List the four elements that must be present for a market to exist.

2. What is the market process?

3. What is the difference between demand and want?

4. Briefly explain each of the following:

a) The market-size effect

b) The real income effect

c) The substitution effect

5. Why does a fall in price increase real income?

6. Why is the typical demand curve downward sloping?

7. What are normal goods? Give three specific examples of normal goods.

8. What are inferior goods? Give three specific examples of inferior goods.

9. With the help of an appropriate diagram, explain the difference between a change in demand and a change in quantity demanded.

10. How is an increase in demand illustrated on a graph? How is a decrease in demand illustrated on a graph?

11. What is the difference between supply and quantity supplied?

12. What is a supply schedule?

13. State the law of supply.

14. Explain how price serves as a production motivator.

15. What is a supply curve?

16. Give three examples of production substitutes.

17. What are joint products? Give two examples of joint products.

18. Define each of the following terms:

a) Shortage

b) Surplus

19. What is the effect of a shortage on price? What is the effect of a surplus on price?

20. Define equilibrium price and equilibrium quantity.

Answer 1

1. 4p's

Product,price,place and promotion are the (4p's)elements that must be present for a market to exist.

2.market process is setting goals and objectives for a particular business and then planning and evaluating the process.

3.demand is the desire and ability alon with willingness to buy a good or service,whereas want is just the desire.

4.a. market size effect

It is the effect that market has on the price and quantity demanded of a product.

b.real income effect

When peoples income increases,they buy more normal goods and less inferior goods.this is known as real-income effect.

C.substitution effect

When price of one good increases,demand of substitute good increases.this is known as substitution effect.

5. When the price falls,it takes less money to buy goods and services and therefore we say that real-income increases because of fall in price.

6. Typical demand curve is downward sloping because there is inverse relationship between price and quantity demanded of the product.

7.normal goods are the goods which prople buy when their income increases.for example bike,computer,laptop.

8.inferior goods are the basic necessities.for example rice,wheat,maize.

11.supply refers to a curve and quantity supplied is referring to a point on the supply curve.

12.supply schedule is the supply table in which price and quantity supplied of the product is mentioned.

13.law of supply states that as the price of the product increases,quantity supplied will increase and vice-versa.there is direct relationship between price and quantity supplied of the product.

14.price serves as a production motivator because if price is more producers will produce more of the product according to law of supply.

15.supply curve shows the relationship between price and quantity supplied of the product.

16.examples of production substitutes are

Tea and coffee,pepsi and coca-cola,samsung refrigerator and L.G refrigerator.

17.when one product is used to produce other product,it is known as joint products.examples are milk-cheese,crude oil-fuel.

18.when demand is greater than supply it is known as shortage.when supply is greater than demand it is known as surplus.

19.in shortage price decreases below equilibrium price level.in surplus price increases above equilibrium price level.

20.equilibrium price is the price at which quantity demanded and supplied are equal.equilibrium quantity is the quantity at which quantity demanded and quantity supplied are equal.