Supply and Demand Lecture Notes

These flashcards cover the key concepts of supply and demand as discussed in the lecture notes.

What is the law of demand?

The law of demand states that as the price of a good decreases, the quantity demanded increases, and vice versa.

What does the demand curve illustrate?

The demand curve illustrates the relationship between the price of a good and the quantity demanded by consumers.

What are the main determinants of demand?

Tastes, number and price of substitute goods, number and price of complementary goods, income, expectations, and economic conditions.

What results in a rightward shift of the demand curve?

An increase in demand, which can be caused by factors such as increased income or a rise in the price of substitute goods.

What causes a movement along the demand curve?

A change in price causes a movement along the demand curve.

What type of demand function is represented by Qd = a - bP?

A simple demand function where Q is quantity, P is price, and a and b are constants.

What does the term 'market demand' refer to?

Market demand refers to the total demand for a product in the market, which is the horizontal sum of individual demands.

How do supply curves differ from demand curves?

Supply curves slope upwards because higher prices motivate producers to supply more, while demand curves slope downwards due to diminishing marginal utility.

What is equilibrium price?

Equilibrium price is the price at which the quantity of goods supplied equals the quantity of goods demanded.

What is price elasticity of demand?

Price elasticity of demand measures how the quantity demanded responds to a change in price.