Supply and Market Equilibrium

Flashcards covering supply, demand functions, determinants of supply, and market equilibrium principles based on lecture notes.

What is the definition of supply?

Supply is the quantity of goods that a seller is willing to offer for sale.

What is the Law of Supply?

The Law of Supply states that, all else being equal, the quantity supplied of a good or service increases as its price increases, and decreases as its price decreases.

What are the three ways supply can be presented?

Supply can be presented through a Supply Schedule, a Supply Function, and a Supply Curve.

Using the demand function $Q_d = 500 - 2P$, what is the quantity demanded when $P = 80$?

$$Q_d = 340$$

Using the demand function $Q_d = 500 - 2P$, what is the quantity demanded when $P = 160$?

$$Q_d = 180$$

Using the demand function $Q_d = 200 - 5P$ for Product Y, what is the quantity demanded when $P = 2$?

$$Q_d = 190$$

Using the demand function $Q_d = 200 - 5P$ for Product Y, what is the quantity demanded when $P = 10$?

$$Q_d = 150$$

Given the supply function $Q_s = -100 + 3P$ for Product X, what is the quantity supplied ($Q_s$) when $P = 80$?

$$Q_s = 140$$

Given the supply function $Q_s = -100 + 3P$ for Product X, what is the quantity supplied ($Q_s$) when $P = 160$?

$$Q_s = 380$$

How does technology impact the supply capability of firms?

Improvements in technology increase the ability of firms to supply goods.

How does an increase in the price of another good requiring the same input and technology affect a firm's production?

It can influence the production decision of a firm by encouraging them to alter which good they produce.

What does the determinant "number of sellers" refer to in economics?

The number of sellers refers to the number of firms competing in the market.

How do higher resource costs affect business production decisions?

Higher resource costs lead to higher production costs, which may cause businesses to produce less.

How do government subsidies and taxes impact production differently?

Subsidies encourage production, while taxes discourage production.

What is market equilibrium?

Market equilibrium occurs when the quantity of a good or service demanded by consumers equals the quantity supplied by producers at a particular price level.

In the market equilibrium diagram shown below, what condition exists above the equilibrium price, and what condition exists below it?

Above the equilibrium price there is a surplus, while below the equilibrium price there is a shortage.

Given $Q_d = 500 - 2P$ and $Q_s = -100 + 3P$, how is the equilibrium price ($P$) calculated?

Equilibrium price is found by setting $Q_s = Q_d$: $-100 + 3P = 500 - 2P → 5P = 600 → P = 120$.

Given $Q_d = 500 - 2P$ and $Q_s = -100 + 3P$, what is the equilibrium quantity?

The equilibrium quantity is $260$, found by substituting $P = 120$ into either equation.

What is Equilibrium Price?

Equilibrium Price is the price at which consumers are willing to buy exactly the quantity of goods that producers are willing to sell.

What is Equilibrium Quantity?

Equilibrium Quantity is the quantity of goods or services that are bought and sold at the equilibrium price.

What is an excess demand (shortage)?

An excess demand (shortage) occurs when the price is set below the equilibrium price, causing demand to exceed supply and driving prices up.

What is an excess supply (surplus)?

An excess supply (surplus) occurs when the price is set above the equilibrium price, causing supply to exceed demand and prompting producers to lower prices.

How does the market adjust when the price is set too high?

Suppliers lower the price to clear excess inventory, which increases demand until equilibrium is restored.

How does the market adjust when the price is set too low?

Suppliers raise the price due to high demand and limited supply, which decreases demand until equilibrium is restored.

For Color Combi, Inc., given the supply function $Q_s = 11 + 3P$, what is the quantity supplied when $P = 14$?

$$Q_s = 53$$

For Color Combi, Inc., given the supply function $Q_s = 11 + 3P$, what is the quantity supplied when $P = 32$?

$$Q_s = 107$$