Macroeconomics Chapter 3

law of demand

as the price of a good increases, the quantity demanded decreases, and vice versa

as the price of a good increases, the quantity demanded _____ and there is an ______ movement along the demand curve

shrinks, upward

as the price of a good decreases, the quantity demanded _____ and there is an ______ movement along the demand curve

expands, downward

an increase in demand causes a shift to the ______

right

a decrease in demand causes a shift to the ______

left

what are some common causes of an increase in demand (rightward shift)

consumer incomes rise, the good becomes more popular

the price of a competing substitute good goes up, so the demand curve shifts ______

right

what are some common causes of a decrease in demand (leftward shift)

consumer incomes drop, the product goes out of style, future economic worries cause people to spend less rn

5 factors that cause a shift in the demand curve

consumer preferences, prices of related goods, income of consumers, expectations of future prices, # of buyers in market

inferior good

a good where demand decreases when income increases and increases when income decreased

inferior good examples

used clothing, instant ramen, store brand products

normal good

a good where demand increases when income increases and decreases when income decreases

normal good examples

luxury items, name brand products, vacations

law of supply

as the price of a good increases, the quantity supplied increases, and vice versa

as the price of a good increases, the quantity supplied _____ and there is an ______ movement along the supply curve

increases, upward

as the price of a good decreases, the quantity supplied _____ and there is an ______ movement along the supply curve

decreases, downward

an increase in supply causes a shift to the ______

right

a decrease in supply causes a shift to the ______

left

common causes of a rightward shift of the supply curve

lower production costs, technological improvements (suppliers produce more quantity at the same price)

common causes of a leftward shift of the supply curve

higher production costs, natural disasters ruining manufacturing plants (suppliers produce less quantity at the same price)

4 factors that cause a shift in the supply curve

cost of inputs, technology/productivity, government policies, # of sellers

3 factors that would cause an increase in demand

income increases, price of a substitute increases, # of buyers increases

3 factors that would cause an increase in supply

cost of inputs decreases, technology improves, # of sellers increases