Demand
A local coffee shop lowers the price of lattes. As a result, students start buying more lattes each week. What does this scenario illustrate?
An extension in quantity demanded due to a fall in price.
A farmer decides to sell more apples after prices increase. What type of supply change is this?
An extension in supply due to a rise in price.
In a free market, the price of a product rises until the amount buyers want to buy equals the amount sellers want to sell. What is this price called?
Equilibrium price.
A rise in income leads to more people buying gym memberships. How does this affect the demand curve?
The demand curve shifts to the right.
A 50% off sale leads to a rush of buyers. Which factor affecting demand does this represent?
Price of the good itself.
A fashion brand releases a limited edition sneaker, and demand skyrockets. What type of good is this, and what’s driving the demand increase?
A normal good (Luxury); consumer preferences is influencing demand.
A rise in the cost of fertilizer causes farmers to plant fewer crops. What impact does this have on supply?
A decrease in supply due to increased production costs.
A popular toy is initially underpriced, leading to long lines and empty shelves. What does this imply about its market condition?
A shortage—demand exceeds supply at the current price.
Bad weather destroys a large portion of the tomato crop. What happens to the supply of tomatoes?
The supply curve shifts to the left.
A new competitor enters the smartphone market, offering cheaper models. What effect might this have on the supply of smartphones in the market?
Increase in supply due to market entry (increase in number of sellers).
A consumer switches from beef to chicken after a rise in beef prices. What relationship between the two goods does this reflect?
They are substitutes; when the price of one rises, demand for the other increases.
A factory invests in new machinery that allows it to produce goods faster. What impact will this likely have on the supply curve?
The supply curve will shift rightward due to improved production efficiency.
A clothing retailer discounts winter coats, but after the sale begins, inventory piles up. What does this suggest?
A surplus—supply exceeds demand at the current price.
A fall in the price of pasta leads to an increase in demand for tomato sauce. What relationship between these goods is shown?
They are complements—demand for one increases when the other becomes cheaper.
A rise in consumer confidence leads to increased spending on travel. What demand factor is influencing this behavior?
Expectations/future income expectations.
A high-income neighborhood sees an increase in demand for organic produce. What concept explains the stronger preference for these goods?
They are income-elastic normal goods—demand rises more than proportionately with income.
A government introduces a subsidy for domestic wheat producers. What will happen to the market supply of wheat?
Supply will increase because producers can now produce at a lower cost.
When the demand curve shifts right while supply remains constant, what happens to the equilibrium price and quantity?
Equilibrium price and quantity both increase.
A successful advertising campaign boosts demand for a brand, while a new production technique reduces costs. What happens to equilibrium price and quantity?
Quantity rises, but price may rise, fall, or stay the same depending on the magnitude of the shifts.
A rise in the price of raw materials causes businesses to raise their product prices. Which factor affecting supply is at play?
Cost of production.
A celebrity publicly endorses a specific health drink, and its sales triple overnight. What non-price factor caused this change in demand?
Consumer tastes/preferences influenced by advertising or celebrity endorsement.
A global pandemic disrupts supply chains and reduces factory output. How does this affect market supply?
Supply decreases due to external (natural disaster), non-price factors impacting production capability.
A government fixes the price of bread below the market equilibrium to make it affordable. What unintended market condition may result?
A shortage—price controls prevent the market from clearing naturally.
A recession reduces consumer incomes, while input costs for producers also fall. What likely happens to the demand and supply of normal goods?
Demand shifts left (decrease), supply shifts right (increase), leading to lower equilibrium price; effect on quantity is uncertain.
Technological advancement allows a car factory to reduce waste and speed up production. What impact does this have on supply and why?
Increases supply due to improved productive efficiency/productivity (technological factor/advanced technology).