Supply and Demand

supplyanddemand

 


Basics
Supply = Quantity of product available for buyers.

Demand = Quantity of product desired by buyers.

Equilibrium = Market-Clearing Price = Point at which Supply and Demand are equal.


Supply
The higher the Price, the higher the Supply
(Producers, eager to make money, will make a product in higher quantities as its price rises.)

The lower the Price, the lower the Supply.
(Producers, not wanting to lose money, will make a product in lower quantities as its price falls.)


Demand

The higher the Price, the lower the Demand.
(Buyers, not wanting to spend too much, will buy a product in lower quantities as its price rises.)

The lower the Price, the higher the Demand.
(Buyers, sensing a bargain, will buy a product in higher quantities as its price falls.)


Practice – Questions
supplyanddemand
1.  According to the above Supply-and-Demand curves, the higher the Price, the higher the:
A.  Demand
B.  Market-Clearing Price
C.  Equilibrium Price
D.  Supply

2.  According to the above Supply-and-Demand curves, the lower the Price, the lower the:
A.  Demand
B.  Market-Clearing Price
C.  Equilibrium Price
D.  Supply

3.  According to the above Supply-and-Demand curves, the higher the Price, the lower the:
A.  Demand
B.  Market-Clearing Price
C.  Equilibrium Price
D.  Supply

4.  According to the above Supply-and-Demand curves, the lower the Price, the higher the:
A.  Demand
B.  Market-Clearing Price
C.  Equilibrium Price
D.  Supply

5.  According to the above Supply-and-Demand curves, Supply and Demand are equal at:
A.  Demand
B.  Equilibrium (Market-Clearing Price)
C.  Christmas
D.  Supply


Practice – Answers
1.  D.  Supply

2.  D.  Supply

3.  A.  Demand

4.  A.  Demand

5.  B.  Equilibrium (Market-Clearing Price)

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