demand and supply

definition of competitive markets?

many buyers and sellers of the same good or service, none of whom can influence the price

what are the 5 elements that affect the supply and demand model?

1. The demand curve

2. The supply curve

3. Factors that shift the demand curve and factors that shift the

supply curve

4. The market equilibrium

5. Changes in the market equilibrium

what is the demand schedule?

is a table showing how much of a good or service consumers will want to buy at different prices 

what does the demand curve show?

the quantity demanded at various price 

definition of quantity demanded?

the quantity that buyers are willing to purchase at a particular price

what is the law of demand?

a higher price for a good leads people to demand a smaller quantity of that good, other things equal

what happens when there is a change in the price of a good? 

movement along a demand curve 

what are the factors that shift the demand curve?

1. Changes in the prices of related goods or services

2. Changes in income

3. Changes in tastes / fashion/ fad

4. Changes in expectations

5. Changes in the number of consumers

what factors result in changes in prices of related goods? 

• substitutes 

• complements 

what happens to your income when purchasing a normal good?

Demand increases when income increases

what happens to your income when purchasing an inferior good?

demand decreases when income increase

definition of the supply schedule?

shows how much of a good or service would be supplied at different prices

definition of supply curve?

shows the quantity supplied at various prices

what is quantity supplied?

is the quantity that producers are willing and able to sell at a particular price of that good/service

what are the factors that shift the supply curve?

1. the number of producers.

2. expectations.

3. technology.

4. input prices.

5. the prices of related goods or services.

when is it considered a surplus on a graph?

when the price is above its equilibrium level

do surpluses last?

no they do not, sellers will reduce price so they can move goods off the shelves

when is it considered a shortage on the graph?

when price is below its equilibrium