Demand and Supply Flashcards

Flashcards based on the lecture notes about Demand and Supply.

Market

A group of buyers and sellers of a particular product.

Competitive Market

One with many buyers and sellers, each has a negligible effect on price.

Quantity Demanded

The amount of the good that buyers are willing and able to purchase.

Law of Demand

The claim that the quantity demanded of a good increases [decreases] when the price of the good decreases [increases], other things being equal.

Demand Schedule

A table that shows the relationship between the price of a good and the quantity demanded.

Other Things

Non-price determinants of demand that determine buyers’ demand for a good, other than the good’s price.

Normal Good

Positively related to income, meaning demand increases as income increases.

Substitutes

An increase in the price of one causes an increase in demand for the other.

Complements

An increase in the price of one causes a fall in demand for the other.

Quantity Supplied

The amount that sellers are willing and able to sell.

Law of Supply

The claim that the quantity supplied of a good increases [decreases] when the price of the good increases [decreases], other things being equal.

Supply schedule

A table that shows the relationship between the price of a good and the quantity supplied.

Technology

Technology determines how much inputs are required to produce a unit of output.

Equilibrium

P has reached the level where quantity supplied equals quantity demanded.

Equilibrium Price

The price that equates quantity supplied with quantity demanded.

Equilibrium Quantity

The quantity supplied and quantity demanded at the equilibrium price.

Surplus (excess supply)

When quantity supplied is greater than quantity demanded.

Shortage (excess demand)

When quantity demanded is greater than quantity supplied.