2.1 Demand and Supply Curves

Flashcards covering key vocabulary from economics lecture notes.

Effective Demand

The quantity of a product or service that consumers are willing and able to purchase at given price levels.

Willingness to Buy

The desire or inclination of consumers to purchase goods and services.

Ability to Pay

Having the financial means or resources to buy the desired goods or services.

Availability of Goods and Services

Products must be present in the market for consumers to purchase.

Consumer Awareness

Awareness of the existence and benefits of products is essential for generating demand.

Accessibility of Products

Products should be physically and economically accessible to the consumer base.

Price Elasticity of Demand

How sensitive the demand for a product is to price changes.

Individual Demand

The quantity of a good or service a single consumer is prepared to purchase at various price points.

Production Costs

Costs incurred directly influence the willingness and ability to supply.

Technological Advancements

Enhancements in technology can lead to increased production efficiency.

Expectations of Producers

Future market predictions can affect current supply decisions.

Market Demand

The aggregate quantity of a good or service all consumers in a market are willing to buy at various price levels.

Cumulative Demand

Summation of individual demands at each price point.

Market Supply

Represents the total amount of a good or service all producers in a market are ready to sell at different prices.

Collation Method

Incorporates individual supplies, accounting for overall production capabilities and cost factors.

Demand

Refers to how much of a product or service consumers are willing and able to purchase at different price points.

Price-Demand Relationship

An increase in the price of a good leads to a decrease in its demand, illustrating an inverse relationship.

Normal Goods

Goods whose demand increases with an increase in consumer income.

Inferior Goods

The demand for these goods may decrease as incomes rise, as people opt for better-quality substitutes.

Price Elasticity of Demand

Measures the responsiveness of demand to price changes.

Supply

The quantity of a product or service that a market can offer.

Production Costs

Expenses incurred in the process of producing a good or service.

Increased Production Costs

Higher costs lead to lower profit margins at existing prices, compelling producers to reduce the quantity supplied, shifting the supply curve leftwards.

Decreased Production Costs

Reductions in costs enable producers to offer more at each price level, shifting the supply curve rightwards.

Technological Advancements

Innovations typically increase productivity, leading to a rightward shift in the supply curve.

Producer Expectations

Anticipations producers have about future market conditions, which can influence their current supply decisions.

Anticipation of Higher Prices

If producers expect higher prices in the future, they might reduce current supply to benefit from future gains, decreasing current supply.

Anticipation of Lower Prices

Expectations of a decline in future prices might lead to an increase in current supply to avoid future losses.

Government Policies

Government actions, through policies and regulations, can have a significant impact on supply.

Taxes

Imposing these on certain goods can increase production costs, leading to a decrease in supply.

Subsidies

Offering these can lower production costs or provide financial incentives, increasing supply.

Global Events

Events like geopolitical tensions, pandemics, and natural disasters can have profound impacts on global supply chains and production capabilities.

Supply Chain Disruptions

Events causing logistical challenges or production halts can lead to a significant decrease in supply.

Demand Curve

This graphically represents the relationship between the price of a good and the quantity demanded by consumers.

Shifts in Demand Curve

A change in this at all price points, prompted by factors other than the price of the good itself.

Income Effect on Demand

Income levels directly affect demand. An increase in income usually leads to higher demand for normal goods, while demand for inferior goods decreases.

Fluctuation in Raw Material Prices

Variations in the costs of raw materials, like metals or energy, directly affect production expenses. An increase in these costs can decrease supply, shifting the curve leftward.

Wage Dynamics

Changes in labor costs, due to wage increases or labor shortages, can also impact the supply curve. Higher labor costs might reduce the quantity of goods a firm can supply at a given price.

Impact of Weather Extremes

Agriculture, heavily dependent on weather conditions, faces supply fluctuations due to events like droughts, floods, or unseasonal temperatures.

Long-Term Climate Effects

Persistent changes in climate patterns can lead to significant alterations in agricultural supply, as farming regions adapt to new conditions.

Shift in the Demand Curve

Signifies a change in the entire demand relationship, reflecting a change in the quantity demanded at every price level.

Shift in the Supply Curve

Represents a change in the quantity supplied at every price point, differing from a movement along the curve caused by a price change.

Movements Along the Demand Curve

Happen when there is a change in the quantity demanded resulting from a price change, with all other factors held constant.

Movements Along the Supply Curve

Occur when the quantity supplied changes in response to a change in the good's price, while other influences remain constant.