Suppose that we illustrate demand and supply with quantity on the horizontal axis and price on the vertical axis. Which of the following statements is false?
A)Changes in exogenous variables are represented by shifts in the demand and/or supply curves.
B)Changes in endogenous variables are represented by movements along the supply and/or demand curves.
C)Price and quantity are the exogenous variables in this representation.
D)The equilibrium is represented as the intersection of supply and demand curves.

Question

Quizplus · Accepted Answer

In the demand and supply model, price and quantity are the endogenous variables, not exogenous variables. Exogenous variables are factors outside of the model that can affect demand or supply, such as changes in government policy, technology, or consumer preferences. Changes in these exogenous variables will shift the demand and/or supply curves. On the other hand, changes in endogenous variables, such as price and quantity, will cause movements along the demand and/or supply curves. The equilibrium is represented as the intersection of supply and demand curves, and this point indicates the market-clearing price and quantity. In this representation, price and quantity are the endogenous variables, not the exogenous variables. Exogenous variables are factors that affect demand or supply but are not determined by the market, such as changes in taxes, technology, or government regulations. Endogenous variables are factors that are determined by the market, such as the price and quantity of goods and services bought and sold.

Suppose That We Illustrate Demand and Supply with Quantity on the Horizontal