CFA Chartered Financial Analyst Level 1: Economics Questions with Correct Answers.

Product Markets (Goods Markets) Correct Answer Markets for goods and services to consumers Factor Markets Correct Answer Markets for factors of production (raw material, goods and services used in production) Intermediate Goods Correct Answer Good and services used in the production of final goods and services. Demand Function Correct Answer Provides the quantity demanded as a function of price of the good or service, the prices of related goods or services, and some measure of income. Supply Function Correct Answer Provides the quantity supplied as a function of price of the good or service and the prices of productive inputs, and depends on the technology used to produce the good or service. Change in Price Correct Answer The change in quantity demanded (supplied) in response to this represents a movement along a demand (supply) curve, not a change in demand (supply). Shifts in Demand Curve Correct Answer Demand is affected by changes in consumer tastes and typically increases (shifts to the right) with increases in income, increases in the price of substitute goods, or decreases in the price of complementary goods. Shifts in Supply Curve Correct Answer Supply is increases (shifted to the right) by advances in production technology and by decreases in input prices (prices of factors of production). Aggregate (market) Demand or Supply Function Correct Answer Calculated by summing the quantities demanded (supplied) at each price for individual demand (supply) functions. Equilibrium Price Correct Answer The price at which the quantity demanded equals the quantity supplied. When the market price is greater than this, the quantity supplied is greater than the quantity demanded (excess supply). and competition among suppliers for sales will drive the price down towards this.