Ba 211 – Microeconomics
Problem Set #2 – Chapter 4
#1. (5 pts) Define demand and the law of demand.
The law of demand states that other factors being constant, price and quantity demand of any good and
service are inversely related to each other. When the price of a product increases, the demand for the
same product will fall.
Demand is an economic principle that describes a consumer’s desire and willingness to pay a price for a
specific good or service. Holding all other factors constant, an increase in the price of a good or service
will decrease demand, and vice versa.
#2. (5 pts) Explain the difference between an increase in demand, and an increase in the quantity
demanded.
An increase in quality demand is caused by a reduction in price. It involves movement along the demand
curve. The demand curve itself does not change, but a change in price cause a change in the quality
demand.
An increase in demand involves an actual shift of the entire demand curve to the right. At each price, a
greater quantity is demanded compared to what was previously demanded.
#3. (5 pts) Define supply and the law of supply.
Supply is a fundamental economic concept that describes the total amount of a specific good or service
that is available to consumers. Supply can relate to the amount available at a specific price or the
amount available across a range of prices if displayed on a graph.
The law of supply is a fundamental principle of economic theory which states that, all else equal, an
increase in price results in an increase in quantity supplied. In other words, there is a direct relationship
between price and quantity: quantities respond in the same direction as price changes.
#4. (5 pts) Explain the difference between an increase in supply and an increase in the quantity
supplied.
The Quantity Supplied is an amount at a given price while Supply is the entire relationship between the
