Question

1. The quantity demanded of a product generally __________ (increases/decreases) as the price of the product falls, ceteris paribus.

2. The supply curve depicts the relationship between the __________ and the __________.

3. From the following list, choose the variables that are held fixed when drawing a market supply curve:
•The price of the product      
•Wages paid to workers     
•The price of materials used in production        
•Taxes paid by producers          
•the quantity of the product purchased

Answer 1

1. The quantity demanded of a product generally increases as the price of the product falls, ceteris paribus.

Note: According to Law of Demand, higher the price lower the demand and Lower the price higher the demand.

2. The supply curve depicts the relationship between the Price and the Quantity Supplied.

3. From the following list, choose the variables that are held fixed when drawing a market supply curve:

• Wage paid to workers
• The price of the materials used in production
• Taxes paid by producers.

Note: The supply curve represents different level of quantity supplied at various price level. Thus, price and quantity supplied are variable in supply curve. With this rationale we can conclude that wages paid, price of materials used and taxes remains fixed.