Demand and Supply

Flashcards covering key vocabulary related to Demand and Supply in Economics.

Market

Arrangement that allows exchange to take place

Model

Simplification of reality

Competitive Market

Many buyers and many sellers

Demand Factor 1

Factors that create a market demand: Tastes and Preferences

Demand Factor 2

Factors that create a market demand: Buyers' Income

Demand Factor 3

Factors that create a market demand: Prices of related goods (Substitutes and complements)

Demand Factor 4

Factors that create a market demand: Buyers’s expectations of future price

Demand Factor 5

Factors that create a market demand: The number of buyers (i.e., population)

Demand Factor 6

Factors that create a market demand: Price of the Product

Law of Demand

If all factors that can affect demand are constant, then if the price of the product rises, the quantity demand of the product falls, and vice versa

Supply Factor 1

Factors that create Supply: Technology

Supply Factor 2

Factors that create Supply: Input Prices

Supply Factor 3

Factors that create Supply: Prices in Alternative Markets

Supply Factor 4

Factors that create Supply: Sellers’ Expectations of Price

Supply Factor 5

Factors that create Supply: Number of Sellers

Supply Factor 6

Factors that create Supply: Natural Events

Supply Factor 7

Factors that create Supply: The price of the product

Law of Supply

Changes in the price cause the quantity supplied to change in the same direction

Market Equilibrium

Occurs where quantity supplied meets quantity demanded

Surplus

Quantity supplied is greater than quantity demanded

Shortage

Quantity supplied is less than quantity demanded