Economics Unit 3 – Supply and Demand Review – Flashcards
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If the price of a good increases, according to the law of demand what happens to the quantity demanded of the good?
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the quantity demanded decreases
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In what direction do price and quantity demanded move?
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in opposite directions
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What does quantity demanded refer to?
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the number of units of a good purchased at a specific price
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How is an individual demand curve different from a market demand curve?
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a market demand curve is the sum of individual demand curves
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How does the demand curve move when demand increases?
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to the right
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How does the demand curve move when demand decreases?
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to the left
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How do a person's preferences affect the demand curve?
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As popularity increases, demand increases and the curve shifts to the right, and vice versa
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What happens to the demand of a good if there are more buyers?
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demand increases
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If htere are fewer buyeres for a good, what happens to demand?
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demand decreases
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What is one factor that may cause the amount of buyers to increase?
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high birth rates
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What is one factor that may cause the amount of buyers to decrease?
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high death rates
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What one factor can cause a change in quantity demanded?
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price
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How is a change in price depicted on a graph?
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the movement of a point on the demand curve
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What is supply?
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the willingness and ability of sellers to produce and offer to sell goods and services
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What does the law of supply say?
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As price increases, supply increases. As price decreases, supply decreases.
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What is quantity supplied?
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the number of units of a good produced and offered for sale
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What does it mean to say the supply curve "shifts"?
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supply increases or decreases
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How do some taxes increase per-unit costs?
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they increase the production cost per unit, lowering profit
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What is a subsidy?
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a financial payment made by the government for certain actions
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what happens to a supply curve when a subsidy is added?
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shifts to the right
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what happens to a supply curve when a subsidy is eliminated?
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shifts to the left
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what is a surplus?
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the condition in which the quantity supplied of a good exceeds the quanitity of a good demanded
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What is a shortage?
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the condition in which the quanitity demanded of a good exceeds the quantity of a good supplied
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What makes price rise when a shortage exists?
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1: an increase in demand 2: moving price closer to equilibrium
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How does equilibrium price change when demand for a good increases?
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It increases
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How does equilibrium price change when demand for a good decreases?
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it decreases
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What is the substitution effect?
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If the price of one good increases, demand for a similar (substitute) good increases
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What is the compliment effect?
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If the price of one good increases, demand will decrease for both this good and any of its complements
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What are the 5 determinants of demand?
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income, tastes and preferences, price of related goods, number of buyers, and future price
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What are the 4 determinants of supply?
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resource price, technology, subsidy, and number of sellers
