supply and demand

Normal Goods

things you always wanted and can now afford to buy

Inferior Goods

Goods purchased more when prices rise.

Law of Demand

Higher prices lead to lower quantity demanded, and visa versa

Supply

Quantity sellers are willing and able to offer at a various prices.

Quantity Supply

The quantity a seller is able and willing to offer a given price

Equilibrium

Point where demand and supply cross, the buyer buys for that price and seller agrees to sell for that price

Market Price

Price at which goods are bought and sold in an open market

Market Quantity

Total amount demanded or supplied at a specific speed

Equilibrium Price

Another term for market price

Equilibrium Quantity

another term for market quantity

Conspicuous Consumption

Spending to display wealth and social status.

Price Ceilings

Government-imposed maximum price for goods.

Price Floors

Government-imposed minimum price for goods.

Inelastic demand

there isn't a real change in price and people still buy

Elastic demand

One consumers react to a price change -> discount people buy more

Unit elastic demand

when the size of the price changes equals the size quantity change

Six reasons a person has a new demand

-number of consumers

-price of complementary goods

-price of substitute goods

-Consumer income

-expectations

-change in consumer taste

Five reasons supply might change

-disaster

-new technology

-discovery of a new resource

-Education

-change the cost of production

Surplus

an amount that is more than needed, excess

Shortage

An amount that is less than needed

shift demand left

decrease in demand

shift demand right

increase in quantity

Shift supply right

increase in supply

Shift supply left

decrease in supply

Demand

The consumer is willing to buy at a various price

Quantity demand

You know the price and are willing to buy it at that price

Price

has an inverse relationship with quantity demand (higher the price less demand)