Basic Economics Questions
What does ceteris paribus mean?
"All else being equal" – it assumes other factors remain constant while analyzing one variable.
What is the definition of demand?
The quantity of a good or service consumers are willing and able to buy at various prices.
What is the Law of Supply?
The principle that quantity supplied increases as price increases, and decreases as price decreases.
In the supply function what does P represent?
Price
If the price of hamburgers increases, what happens to the demand for hot dogs?
Demand for hot dogs increases as people switch to the alternative.
Why is ceteris paribus important in economic models?
It allows economists to isolate the effect of one change without interference from other variables.
What happens to the demand for inferior goods when income rises?
Demand decreases because consumers switch to higher-quality alternatives.
How does a supply curve typically slope, and why?
Upward from left to right because higher prices incentivize producers to supply more goods.
If the demand function is Qd = 100 – 2P, what is the quantity demanded when the price is 20?
Qd = 100 – 2(20) = 100 – 40 = 60
If consumers expect the price of gas to rise next week, what will likely happen to demand today?
Demand will increase as people buy gas now before the price rises.
What is the difference between a good and a service in economics?
A good is a tangible product (e.g., a car), while a service is intangible work performed for someone else (e.g., a haircut).
How does a demand curve typically slope, and why?
Downward from left to right because higher prices discourage purchases, while lower prices encourage them.
What are the two ways we have studied that government intervention can impact the supply of a product?
What is the basic demand function equation?
Qd = a - bP
A new technology is developed that lowers production costs for electric cars. How does this affect supply?
Supply increases as manufacturers can produce more at the same cost.
What is a market, and what are its two main participants?
A market is where buyers and sellers interact to exchange goods and services. The two main participants are consumers (buyers) and producers (sellers).
What is the law of demand?
As price increases, quantity demanded decreases, and vice versa
What is the difference between a shift in the supply curve and a movement along the supply curve?
A movement occurs when the price changes, while a shift happens due to non-price determinants (e.g., technology, input costs).
What is the basic supply function equation?
Qs = c + dP
If consumer income increases, how does this affect the demand for normal goods?
Demand increases as people can afford to buy more.
What are the four factors of production, and can you provide an example of each? (FASTEST TEAM GETS THE POINTS)
A table showing the total demand of all consumers in the market is called what?
Market Demand Schedule
Why does an increase in the number of firms in a market affect supply?
More firms increase total market supply, leading to potential price decreases.
In the supply equation Qs = 28 + 3P, what do 28 and 3 represent?
28 is the base supply when price is zero; 3 is the rate at which supply increases at each pricelevel.
A severe drought affects coffee plantations worldwide. What happens to coffee supply and price?
Supply decreases, causing prices to rise due to scarcity.