Demand and Supply

Flashcards for reviewing key concepts related to Demand and Supply.

Demand

The amount of a good/service consumers are willing and able to buy at different prices.

Law of Demand

As price goes up, demand goes down; as price goes down, demand goes up.

Substitute Good

A different product that meets the same need—can be used instead of another.

Complementary Good

A product used with another; both are more valuable together than apart.

Supply

The amount of a good/service producers are willing and able to sell at different prices.

Law of Supply

As price goes up, supply goes up; as price goes down, supply goes down.

Revenue

The money a business earns; calculated as Revenue = Price × Quantity Sold.

Elasticity

How much demand/supply changes when the price changes.

Demand Schedule

A table that shows how much of a good one person will buy at different prices.

Demand Curve

A graph showing the relationship between price and quantity demanded, typically sloping downward.

Market Demand

The total quantity demanded by all consumers in a market at each price level.

Law of Diminishing Marginal Utility

The more of something you consume, the less satisfaction you get from each additional unit.

Income Effect

As prices increase, consumers can afford less because their income remains constant.

Substitution Effect

When the price of a good rises, consumers look for cheaper alternatives that satisfy the same need.

Normal Goods

When income increases, demand increases for these goods.

Inferior Goods

When income increases, demand decreases for these goods.

Changes in Consumer Tastes and Preferences

If something becomes more popular, demand increases; if it loses popularity, demand decreases.

Consumer Expectations

If consumers expect future prices to rise, they buy more now, increasing current demand.

Price of Substitute Goods Effects

If the price of a substitute rises, demand for the original good increases.

Price of Complementary Goods Effects

If the price of a complement rises, demand for the original good falls.