Demand and Supply

Very short questions,Demand and Supply

  • What do you mean by demand?

Ans) Demand means the quantity of goods and services which consumers would buy in a market at a given time and price.In order to change desire into demand ,it is essential that the consumer should have both willingness and ability to pay.

  • Define Demand function.

Ans) Demand function is defined as the relationship between demand for a commodity and its determinants.It can be expressed as:

Dx=f(Px,Y,Pr,A,T….)

Where,Dx=Demand for X-Commodity

             Px=Price of X-commodity

            Y=Income of the consumer

            Pr=Price of related goods

            A=Advertisement expenditure

            T=Taste and Preference of the consumer

  • Define linear demand function.

Ans) A demand function is said to be linear when the slope of the demand curve remains constant throughout its length.The simplest form of a linear demand function is  given by the equation

      Dx=a-bPx

In this equation ,The alphabet ’a’denotes total demand at zero price and ‘b’ a constant ,denotes slope of the demand curve .

  • Define non-linear demand function.

Ans) A demand function is said to be non-linear or curvilinear when the slope of a demand curve changes all along the demand curve.A non-linear demand function,generally,takes the form of a power function as

     D=aPx^-b

  • Name four determinants of demand.

Ans ) The four determinants of demand are as follows:

a)Price of  a commodity

b)Income of the consumer

c)Price of related goods

d)Size and composition of population

  •       What do you mean by law of demand?

Ans) Demand for a commodity increases with the fall in price and decreases with the rise in price.There is inverse relationship between price and quantity demanded for a commodity.This inverse relationship between price and quantity demanded is called law of demand.

  • Define normal good.

Ans)Normal good is a good whose demand increases with an increase in income and decrease with a decrease in income of the consumer.There is positive relationship between income and demand.

  • Define Inferior goods.

Ans)When demand for a commodity increase with the decrease in income and decreases with the increase in income of the consumer ,The good is called inferior goods.

  • Define complementary goods.

Ans)When two or more commodities are demanded simultaneously for the satisfaction of a particular want ,they are called complementary goods .

For example,car and petrol,tea and sugar,etc.

  • Define substitute goods.

Ans) Substitute goods are those goods which compete with each other and which can be used interchangeably,like Mayos and Waiwai ,Pepsi and Coke.

  • Define demand schedule.

Ans) A demand schedule is a table which shows the relationship between the price of a commodity and its quantity demanded.

  • What do you mean by movement along demand curve?

Ans) If demand for a commodity changes due to the change price of the same commodity,it can be shown by the different point on the same demand curve which is called movement along demand curve.It is also called change in quantity demanded.

  • What is meant by extension in demand?

Ans)Other things remaining constant ,when the demand for a commodity goes up due to fall in price of the same commodity,it is referred to as an extension in demand.This results in downward movement along the same demand curve.

  • Define contraction in demand.

Ans) Other things remaining constant ,when the demand for a commodity decreases due to rise in price of the same commodity,it is referred to as a contraction in demand.This results in upward movement along the same demand curve.

  • What do you mean by shift in demand curve?

Ans)If demand for a commodity changes due to change in other factor keeping its price constant,the entire demand curve move either rightward or leftward,it is called shift in demand curve or change in demand.

  • Write any four causes for shifting demand curve.

Ans) The following are the causes of shift in demand curve:

  1. Change in income of the consumer.
  2. Change in the price of substitute goods and complementary goods.
  3. Change in taste and preference of the consumer.
  4. Change in size and composition of population.

 

  • What is meant by increase in demand?

Ans)When more quantities of a commodity are demanded due to the favourable change in other factors, ie. Income of the  consumer,price of the related goods,etc,it is referred to as increase in demand.This results in the demand curve for the commodity shifting rightwards.

  • What is meant by decrease in demand?

Ans) As the quantity demanded falls due to unfavourable change in other factors, i.e. income of the consumer,price of related goods,etc., it is referred to as decrease in demand.This results in the demand curve for the commodity shifting leftwards.

  • What are the causes of increase in demand?

Ans) The following are the main causes of increase in demand:

  1. Increase in income of the consumer.
  2. Rise in price of the substitute goods.
  3. Fall in price of the complementary goods.
  4. Expectation of further rise in price.

 

What are the causes of decrease in demand?

Ans) The following are the causes of decrease in demand:

  1. Decrease in income of the consumer.
  2. Fall in price of the substitute goods.
  3. Rise in price of the complementary goods.
  4. Expectation of further fall in price.

 

  • What is meant by individual demand curve?

Ans) An individual demand curve is a curve that shows different quantities of a commodity demanded by an individual consumer at different prices.It is the graphical representation of individual demand schedule.

  • What is market demand curve?

Ans) Market demand curve is a curve that represents the aggregate demand of all the consumers in the market at different prices of a particular commodity.It is horizontal summation of individual demand curves.

  • Define Supply function.

Ans) Supply function is defined as the relationship between supply for a commodity and its determinants.It can be expressed as:

Sx=f(Px,Pf,Pr,G,T…)

Where Sx=Supply function for X-commodity

Px=Price of X-commodity

Pf=Prices of factors of production

Pr=Price of related goods

G=Goal of the producer

T=Technology

  • Define linear supply function .

Ans)A supply function is said to be linear when the slope of the supply curve remains constant throughout its length.The simplest form of a linear supply function is given by the equation,

 Sx=a+bPx

In this equation ,the alphabet ‘a’ denotes total supply at zero price and ‘b’ a constant ,denotes slope of the supply curve.

  • Define non-linear supply function.

Ans) A supply function is said to be non-linear or curvilinear when the slope of the supply curve changes all along the supply curve.A non-linear supply curve function ,gemerally,takes the form of a power function as

Dx=aPx^b

  • Define supply schedule.

Ans) A supply schedule is a table showing various quantities of a good that the sellers would supply at various prices during a period of time .It is of two types: ie; Individual supply schedule and Market supply schedule.

  • Define individual supply schedule.

Ans) Individual supply schedule is defined as the table which shows quantities of a given commodity which an individual firm will supply at all possible prices at a given time.It is a graphical representation of individual supply schedule.

  • What is meant by individual supply curve?

Ans) An individual supply curve is a curve that shows different quantities of a commodity suppliedby an individual consumer at different prices.It is the graphical representation of individual supply schedule.

  • What is meant by market supply schedule?

Ans)Market supply schedule is the table which shows the total quantity of a commodity all firms would supply at each market price per period of time.It is obtained by the summation of individual supply schedule.

  • What is meant by market supply curve?

Ans) Market supply curve is a curve that represents the aggregate supply of all the producers in the market at different prices of a particular commodity.It is horizontal summation of individual supply curves.

  • What is meant by extension in supply?

Ans)Other things remaining constant ,when the supply for a commodity goes up due to rise in price of the same commodity,it is referred to as an extension in supply.This results in upward movement along the same supply curve.

  • Define contraction in supply.

Ans) Other things remaining constant ,when the supply for a commodity goes down due to fall in price of the same commodity,it is referred to as a contraction insupply .This results in downward movement along the same supply curve.

  • What do you mean by shift in supply curve?

Ans)When supply for a commodity increases or decreases ,the whole supply curve is drawn rightward or leftward ,this is referred to as shift in supply curve.Rightwaed shift in supply curve is called increase in  whereas leftward shift is called decrease in supply.

  • What is meant by increase in supply?

Ans)When more quantities of a commodity are supplied due to the favourable change in other factors, ie. goal of the producer,price of the related goods,etc,it is referred to as increase insupply.This results in the supply curve for the commodity shifting rightwards.

  • What is meant by decrease in supply?

Ans) As the quantity supplied falls due to unfavourable change in other factors, i.e. goal of the producer,price of related goods,etc., it is referred to as decrease insupply.This results in the supply curve for the commodity shifting leftwards.

  • What are the causes of increase in supply?

Ans) The following are the main causes of increase in supply:

  1. Increase in price of the related goods.
  2. Decrease in price of factors of production.
  3. Decrease in tax rate.
  4. Favourable weather condition.

 

  • What are the causes of decrease in supply?

Ans) The following are the causes of decrease in supply:

  1. Decrease in price of the related goods.
  2. Increase in price of factors of production.
  3. Increase in tax rate.
  4. Unfavourable weather condition.

 

  • Define market equilibrium.

Ans) The point of interaction between the demand and supply curve is known as equilibrium point.Every market is in equilibrium when total quantity demanded and quantity supplied of a commodity are equal.

 

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