Demand and Supply

A collection of flashcards covering key concepts, definitions, and principles related to demand and supply in economics.

What is the definition of demand?

Demand is defined as the ability and willingness to buy specific quantities of goods in a given period of time at a particular price, ceteris paribus.

What does the Law of Demand state?

The Law of Demand states that the higher the price of a good, the lower the quantity demanded for that good, and the lower the price, the higher the quantity demanded, ceteris paribus.

What is a demand schedule?

A demand schedule shows the relationship between the price of a good and the quantity demanded.

What is the difference between individual demand and market demand?

Individual demand refers to the quantity of a good demanded by a single individual at various prices, while market demand is the total quantity demanded by all consumers in the market at various prices.

List some determinants of demand.

Determinants of demand include price of related goods, consumers' income, tastes and trends, population, supply of money in circulation, expectations about future prices, and advertisement.

What is the difference between changes in quantity demanded and changes in demand?

Changes in quantity demanded occur with price changes along the demand curve, while changes in demand involve shifts of the entire demand curve due to factors other than price.

What are Giffen goods?

Giffen goods are exceptional demand goods where an increase in price leads to an increase in quantity demanded, contrary to the Law of Demand.

What is the definition of supply?

Supply is defined as the ability and willingness to sell or produce a particular product or service in a given period of time at a particular price, ceteris paribus.

What does the Law of Supply state?

The Law of Supply states that the higher the price of a good, the greater the quantity supplied, and the lower the price, the lower the quantity supplied, ceteris paribus.

What is a supply schedule?

A supply schedule shows the relationship between the price of a product and the quantity supplied.

What is market equilibrium?

Market equilibrium is a situation when quantity demanded and quantity supplied are equal, with no tendency for price or quantity to change.

What happens in the case of a surplus?

A surplus occurs when the quantity supplied exceeds the quantity demanded at a given price, leading to downward pressure on prices.

What are the effects of imposing a maximum price (price ceiling)?

A maximum price can lead to shortages, as suppliers reduce the quantity offered, but demand increases.

What are the effects of imposing a minimum price (floor price)?

A minimum price can create surpluses, as suppliers increase the quantity offered, but demand decreases.

What is price elasticity of demand?

Price elasticity of demand measures the sensitivity or responsiveness of the quantity demanded to a change in price.

What are the types of elasticity of demand?

Types of elasticity of demand include perfectly inelastic, inelastic, unitary elastic, elastic, and perfectly elastic.

What is the definition of income elasticity of demand?

Income elasticity of demand measures the sensitivity or responsiveness of the quantity demanded due to a change in income.

What is cross elasticity of demand?

Cross elasticity of demand measures the sensitivity or responsiveness of the quantity demanded of one product due to a change in the price of a related product.

What is price elasticity of supply?

Price elasticity of supply measures the sensitivity or responsiveness of the quantity supplied due to a change in the price of a product or service.

What factors determine price elasticity of supply?

Determinants of price elasticity of supply include technology improvements, time period, availability and mobility of factors of production, nature of the market, and perishability.