Econ Unit 2: Supply ; Demand – Flashcards
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market
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A group of buyers and sellers of a particular product.
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Law of Demand
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When prices DECREASE, quantity demanded INCREASES. When prices INCREASE, quantity demanded DECREASES. It is an indirect relationship between price and quantity supplied.
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What happens when there is an increase in demand?
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The demand curve shifts towards the right.
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What happens when there is a decrease in demand?
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The demand curve shifts towards the left.
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What does the change in price do to the demand curve?
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It moves ALONG the demand curve, but does not shift the curve.
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What factors affect the demand curve, causing a shift?
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consumer taste (popularity), expectation of future price, price of related goods (substitutes, complements), income, and population
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What are the types of price of related goods?
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They are substitutes and complements.
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What is quantity supplied?
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The amount of good sellers are willing and able to sell.
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What DOES NOT cause a supply curve shift?
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A change in price.
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What happens when there is an increase in supply?
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The supply curve shifts towards the right.
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What happens when there is a decrease in supply?
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The supply curve shifts towards the left.
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What does the change in price do to the supply curve?
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It moves ALONG the supply curve, but no shift.
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What factors affect the supply curve, causing a shift?
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technology, number of sellers, seller's expectation of future prices, cost of raw materials, government (taxes, subsidies, regulations)
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equilibrium
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When price has reached quantity supplied and quantity demanded. An intersection of supply and demand curves. Reach by the agreement of buyers and sellers.
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equilibrium price
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When price equates with quantity supplied with quantity demand.
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equilibrium quantity
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When quantity supplied and quantity demanded are at equilibrium price; prices continue to fall until market reaches equilibrium.
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surplus
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situation in which quantity supplied is greater than quantity demanded; also known as excess supply
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shortage
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situation in which quantity demanded is greater than quantity supplied; also known as excess demand
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factor or resource market
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market in which business firms purchase the productive resources from households and households receive income and wages from business firms
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firm
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a business
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product market
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the market in which households purchase the goods and services that firms produce, and business firms receive revenue from households
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complements
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two goods that are bought and used together (ex: cell phone and cell phone charger)
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substitutes
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goods used in place of one another; when the prie
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elasticity of demand
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a measure of how consumers react to a change in price
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inelastic demand
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describes demand that is not very sensitive to a change in price (ex: gasoline, medicine)
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elastic demand
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describes demand that is very sensitive to a change in price (ex: junk food, luxury items)
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Law of Supply
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When prices INCREASE, quantity supplied INCREASES. When pricesDECREASE, quantity supplied DECREASES. It is a direct relationship between price and quantity supplied.
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elasticity of supply
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A measure of the way quantity supplied reacts to a change in price.
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subsidy
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a government payment that supports a business or market; increases supply
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regulation
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government intervention in a market that affects the production of a good; decreases the supply of a product
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price ceiling
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a maximum price that can be legally charged for a good or service; example: rent control
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price floor
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a minimum price for a good or service; example: minimum wage
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IRDL the Turtle
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Increase Right, Decrease Left (a way of remembering which way the graphs shift)
