1. What is a competitive market?

Briefly describe a type of market that is

not perfectly competitive.
➢ Competitive market is a market that has a lot of buyers and sellers but no
one has the power to influence the market alone.
➢ A monopoly is a market that lacks ideal competition. Due to the lack of near
equivalents or alternatives, it has a single supplier providing an exclusive
product, making it vulnerable to consumer exploitation.

2. What are the demand schedule and the demand curve, and how are they
related? Why does the demand curve slope downward?
➢ A demand schedule is a table that presents the quantity demanded at each
price while the demand curve is a graphical representation of the quantity
demanded at various prices in the market. When businesses are deciding
what products and services to offer, they utilize both the demand schedule
and demand curve to illustrate the relationship between the amount
demanded and the price.
➢ The law of the demand curve dictates that the demand curve slopes
downward. When other factors are held constant, it means that the quantity
required and the price of the goods or services have an inverse relationship.

3. Does a change in consumers’ tastes lead to a movement along the

demand curve or to a shift in the demand curve? Does a change in price
lead to a movement along the demand curve or to a shift in the demand
curve? Explain your answers.
➢ The demand curve shifts in response to a change in customer tastes and
preferences because a shift in demand occurs when a different amount is
demanded at every price due to a change in some economic element other
than price.
 ➢ A change in price causes the movement along the demand curve because
a change in price of a single good causes more people to seek it while
keeping all other variables constant.

4. Harry’s income declines, and as a result, he buys more pumpkin juice. Is

pumpkin juice an inferior or a normal good? What happens to Harry’s
demand curve for pumpkin juice?
➢ The pumpkin juice is an inferior good, in which inferior good is a type of
good for which demand increases as consumer incomes decrease. As
Harry’s income declines, he may be forced to switch to a less expensive
product, such as pumpkin juice.
➢ Harry’s demand curve for pumpkin juice will shift to the right. Due to his
income declining his demand for pumpkin juice will increase resulting in a
rightward shift in his demand curve.

5. What are the supply schedule and the supply curve, and how are they
related? Why does the supply curve slope upward?
➢ A supply schedule is a table that shows the relationship between the price
of a good and the quantity of that good that producers are willing and able
to sell.that displays the quantity supplied at each price. A supply curve is a
graph that shows the relationship between the price of a good and the
quantity of that good that producers are willing and able to sell.
➢ Given that the marginal cost for production increases as the quantity of
output increases, the supply curve displays an upward slope. This is due to
the fact that as a good is produced in larger quantities, the fixed production
costs are divided among more units, increasing the average production cost
per unit. The variable costs of production also have a tendency to increase
as the production quantity increases. This is due to the fact that as a good
is produced in larger quantities, demand for the supplies necessary for
producing increases, driving up the prices of those supplies.
6. Does a change in producers’ technology lead to a movement along the
supply curve or to a shift in the supply curve? Does a change in price
lead to a movement along the supply curve or to a shift in the supply
curve?
➢ A change in producers' technology typically leads to a shift in the supply
curve rather than a movement along the existing curve. The marginal cost
of production changes when producers adopt new technologies. The supply
curve shifts to the right as technology improves and the marginal cost of
production decreases. This is due to the fact that companies can now create
more of the good at every level of price. This change indicates a
fundamental shift in the supply curve since it reflects an overall change in
the quantity they are willing and able to supply at every price level.

7. Define the equilibrium of a market. Describe the forces that move a

market toward its equilibrium.
➢ Market equilibrium is when buyers want the same quantity of a good as
sellers are willing to produce and sell at a specific price, creating a balanced
market with no surplus or shortage. Supply and demand drive this process,
adjusting prices until they reach equilibrium. If prices start too high, there's
excess supply, prompting sellers to lower prices; if prices are too low,
excess demand leads to price increases. This cycle continues until quantity
demanded matches quantity supplied, achieving equilibrium. In short,
supply and demand collaborate to regulate prices and bring a market to
balance.
8. Beer and pizza are complements because they are often enjoyed
together. When the price of beer rises, what happens to the supply,
demand, quantity sup- plied, quantity demanded, and price in the market
for pizza?
➢ When beer prices go up, people buy less pizza because they're often
enjoyed together. This means fewer people want pizza at any given price,
causing a drop in demand. However, the amount of pizza available doesn't
change. This leads to a new situation where pizza is cheaper, and fewer
pizzas are both sold and wanted. In short, higher beer prices mean fewer
people want pizza, which makes pizza cheaper, and fewer are sold. The
supply of pizza remains the same.

9. Describe the role of prices in market economies.

➢ A market economy operates based on the evolving demands and
capabilities of market participants. Its main objective is to function
independently and efficiently through the interaction of supply and demand
forces. Prices reflect the monetary value of products and serve as a crucial
factor in allocating capital within the market. They also act as indicators of
unexpected costs, allowing businesses and consumers to adapt to
changing market conditions. Furthermore, prices facilitate the economic
distribution of products and services, playing a vital role in balancing supply
and demand. When prices reach equilibrium, it leads to an effective
allocation of scarce resources, preventing surpluses or shortages.