Supply and Demand Quiz Study Guide

Law of Supply

An increase in price results in an increase in quantity and vice versa

Law of Demand

As price increases, the quantity demanded increases

Increase in demand OR supply

Shift to the right

Decrease in demand OR supply

Shift to the left

Taste and Preferences

(Demand) A product popularity contest

Income

(Demand) Make more, spend more. Make less, spend less.

Related Goods (Demand)

(Demand) Substitute goods can easily be used in place of one another. Complementary goods are used WITH each other.

Expectation of Future Changes in Price and Income

(Demand) Going up? Buy now. Going down? I’ll wait.

Technology and Productivity

(Supply) As technology advances, production becomes more efficient and supply increases

Input Cost

(Supply) Increasing or decreasing the costs of factors of production (land, labor, and capital)

Government Intervention

(Supply) A tax, fee, or regulation will INCREASE production costs. A subsidy will DECREASE production costs.

Expectations for Future Price Change

(Supply) Future prices going up? Supply less now. Future prices going down? Supply more now.

Related Goods (Supply)

(Supply) Complementary and substitute goods supply rise and fall together

Size of Sellers Market

(Supply) More sellers = more supply. Less sellers = less supply.