10. What is a market economy?

The market economy (or so called free market economy or free enterprise economy) is an economic system in which the decisions of many individual buyers and sellers interact to determine the answers to the questions of What, How and Who.

11. Who owns the means of production in a society with a market economy?

There are several essential elements in a market economy. One of these is private property - the right of individuals and businesses to own the means of production. In a free market economy, the major factors of production are privately owned. Private ownership gives people the incentive to use their property to produce things they will sell and make profits.

12. What are the essential elements of a market economy?

There are several essential elements in a market economy. One of these is private property - the right of individuals and businesses to own the means of production. Private ownership gives people the incentive to use their property to produce things they will sell and make profits. This desire to earn profits or the profit motive is a second ingredient in a market economy. The profit motive encourages sellers to produce at the lowest possible cost.

13. What is private property?

Private property means the right of individuals and businesses to own the means of production.

6. DEMAND

1. What is demand?

Demand is comprised of people’s desire, willingness and ability to purchase particular amounts of goods or services at certain prices in a given period of time.

2. What factors alter consumer demand?

Somefactorsincludeconsumers’incomeandtastes, thepricesandavailabilityofrelatedproductslikesubstitutesorcomplementarygoods, andtheitem’susefulnessalterconsumerdemand

3. What goods are called substitutes?

Substitutes are goods that satisfy similar needs and which are normally consumed in place of each other.

4. What are complementary goods?

Complementary goods are those that are normally consumed together (e.g., DVD players and DVD movies).

5. What does the law of demand state?

The law of demand states that the higher the price of a product, the fewer people will demand that product, that is, demand for a product varies inversely with its price, all other factors remaining equal

6. What relationship does the law of demand describe?

The law of demand expressestherelationshipbetweenpricesandthequantityofgoodsandservicesthatwouldbepurchasedateachandeveryprice. Inotherwords, thehigherthepriceof a product, thelowerthequantitydemanded.

7. What does a change in price lead to?

According to the law of demand a change in price results in a change in the quantity demanded, that is, more will be purchased but only at a lower price.

8. How do factors other than a good’s price affect demand?

Factors other than a good’s price which affect the amount consumers are willing to buy are called the non-price determinants of demand

9. What is elasticity as an economic concept?

Elasticity is an economic concept which is concerned with a shift in either demand for or supply of an economic product as the result of a change in a product’s price

10. What demand is considered as elastic?

Elastic demand is a demand for which a small change in price results in a large change in demand.

11. When demand is said to be inelastic?

Inelastic demand is a demand for which a large change in price leads to only a small change in demand.

12. What goods and services is demand inelastic for?

Some essential goodsthat are relatively inexpensive and for which it is difficult to find substitutes such as pharmaceuticals, footwear, electricity, bread,potatoesect

13. Why is demand for necessities inelastic?

Demand for necessities isinelastic because for such goods it is difficult to find substitutes

7. SUPPLY

1.What does supply mean?

supply relates to the quantity of goods or services that a producer or a supplier is willing to bring into the market at a particular price in a given time period, all other things being equal.

2.What does the law of supply state?

The law of supply states that the quantity of a commodity supplied varies directly with its price, all other factors that may determine supply remaining the same.

3.What is a supply schedule?

The relationship between price of a product and its quantity supplied is represented in a table called a supply schedule.

4.What is a supply curve?

The supply curve is a graphic representation of the market supply schedule and the law of supply. The supply curve shows a direct relationship between the quantities of products that firms are willing to produce and sell at various prices, all non-price factors being constant.

5.Why do producers supply more goods at a higher price than at a lower price?

Sloping upward from left to right the supply curve reflects that producers supply more at a higher price and less at a lower price

6.When and why do suppliers increase their production and rise prices?

The law of supply states that the amount offered for sale rises, as the price is higher. The quantity of smth.producers are willing to offer for sale rises, since its price is higher primarily because they need to cover the increased costs of production.

7.What role do prices play for producers?

Price is an important determinant of the quantities supplied. The law of supply states that the amount offered for sale rises, as the price is higher.

8.What is a change in supply caused by?

A change in supply is caused by a change in the non-price determinants of supply.

9.What are the key non-price determinants of supply?

•Changes in the cost of production.

•Changes in technology

•Changes in the price of resources needed to produce goods and services

•Changes in the expectations of future prices

•Changes in the profit opportunities

•Changes in the number of suppliers in the market.

10.What is the price elasticity of supply?

the price elasticity of supply is the degree of proportionality with which the amount of a commodity offered for sale changes in response to a given change in the going price.In other words elasticity of supply is a measure of how much the quantity supplied of a particular product responds to a change in the price of that product.

11.When supply is elastic?

Supply is elastic if a change in price results in a large change in the quantity supplied.

12.What supply is called inelastic?

if a great change in price brings about a small change in the quantity supplied, supply is called inelastic.