econ unit 2 supply and demand

demand

the entire relationship between price and the quantity demanded of a good, ceteris paribus. 

when a determinant other than price changes

the entire demand curve changes….

quantity demanded

specific amount of a good consumers are willing and able to buy at a specific price

quantity demanded

changes only due to a change in the price of the good itself, a single point on the demand curve

supply

the entire relationship between price and the quantity supplied of a good, ceteris paribus

when a determinant other than price changes

entire supply curve will change…..

quantity supplied

specific amount of a good producers are willing and able to sell at a specific price

quantity supplied

changes only due to a change in the price of the good itself, single point on supply curve

equilibrium price

price where quantity demanded = quantity supplied, market-clearing price

equilibrium price

determines equilibrium quantity, forces of supply and demand naturally push the price towards this point

equilibium quantity

quantity bought and sold at equilibrium price, where the market is stable

equilibrium quantity

quantity at the intersection of S and D

law of demand

as the price of a good increases, the quantity demanded decreases (movement up and along the D-curve)

law of supply

as the price of a good increases the quantity supplied increases, movement up and along the S-curve

demand shifts right

tastes and preferences - if a good becomes more fashionable/desirable

demand shifts right, increases

price of a substitute increases (coke), demand for the good (Pepsi) ________

demand shifts left, increases

if the price of a complement (pb) _______, demand for the good (jelly) decreases

demand shifts right, increases

normal good: If consumer income _______, demand for the good increases

demand shifts left, decreases

inferior good (bus rides, used clothing): if consumer income increases, demand for the good _________

demand shifts right, increases

if the number of potential buyers in the market _________

demand shifts right, increase

if consumers expect the price to ________ in the near future (buy now)

supply shifts right, reduces

an improvement in production technology _______ costs

supply shifts left, increases

if the cost of resources (labor, raw materials) ________, profit margin decreases

supply shifts right, increases

more firms entering the market _______ total supply

supply shifts left, increases

an increase in per-unit taxes (like excise) ________ costs

supply shifts right, decreases

a subsidy to producers ________ costs

supply shifts left, increase

if producers expect the price to _______ in the near future (hold supply back)

surplus

occurs when price is above price equilibrium, then forces price down toward equilibrium

quantity supplied > quantity demanded

surplus

surplus, decrease

sellers ________ price to clear excess inventory, moving price down toward price equilibrium

shortage

occurs when price is below price equilibrium, forces price up toward equilibrium

quantity demanded > quantity supplied

shortage

shortage, increase

buyers _______ price to secure limited goods, moving price up toward equilibrium price

both supply and demand curves shift simultaneously

one of the equilibrium results (Pe or Qe) will be indeterminate, and the other will be known

indeterminate

demand increases, supply increases, what is the effect on price?

increases

demand increases, supply increases, what is the effect on quantity?

indeterminate

demand decreases, supply decreases, what is the effect on price?

decreases

demand decreases, supply decreases, what is the effect on quantity?

increases

demand increases, supply decreases, what is the effect on price?

indeterminate

demand increases, supply decreases, what is the effect on quantity?

decreases

demand decreases, supply increases, what is the effect on price?

indeterminate

demand decreases, supply increases, what is the effect on quantity?

price ceiling

legal maximum price

creates a shortage

price ceiling

price floor

legal minimum price

creates a surplus

price floor