Demand and Supply Governing the European Economy

This set of flashcards covers key concepts related to demand, supply, and market equilibrium in regards to the European economy.

What is Demand?

Demand is the quantity of a good that consumers are willing and able to purchase at various prices.

What does a demand curve represent?

A demand curve shows the relationship between the quantity demanded and price, generally sloping downwards.

What happens to the quantity demanded when prices decrease?

When prices decrease, the quantity demanded increases.

What shifts the demand curve?

A shift in the demand curve occurs due to changes in influences on buyers' plans other than the price.

What is the Law of Demand?

The Law of Demand states that as the price of a good rises, the quantity demanded typically decreases.

What is Supply?

Supply is the quantity of a good that producers are willing and able to sell at various prices.

How do you read a supply curve?

A supply curve indicates the quantity that producers plan to sell at a given price and the minimum price at which they will sell.

What is a change in supply?

A change in supply happens when influences on sellers' plans other than the price change, causing a shift in the supply curve.

What is the Market Equilibrium?

Market Equilibrium is the price at which the quantity demanded equals the quantity supplied.

How does a surplus affect prices?

A surplus indicates that the quantity supplied exceeds the quantity demanded, typically leading to a decrease in prices.

How does a shortage affect prices?

A shortage occurs when the quantity demanded exceeds the quantity supplied, usually resulting in an increase in prices.

What occurs when both demand and supply increase?

When both demand and supply increase, the equilibrium quantity increases, but the effect on price can vary.

What happens when demand decreases and supply increases?

When demand decreases and supply increases, the price typically falls, but the effect on quantity is uncertain.

What is the effect of a decrease in both demand and supply?

A decrease in both demand and supply leads to a lower equilibrium quantity, but the direction of price changes can vary.

What are the main factors affecting demand?

Factors affecting demand include price, income, the price of substitutes and complements, and consumer expectations.

What are the main factors affecting supply?

Factors affecting supply include production costs, the number of suppliers, technology, and seller expectations.