2.3-2.5 Demand and supply

Demand and supply graphs, equilibrium, shifts etc

Demand

the quantity of a good or service that consumers are willing and able to purchase at various prices over a specific period.

Supply

The quantity of a good or service that producers are willing and able to offer for sale at various prices over a specific period.

Law of supply

As price increases, quantity supplied increases, as price decreases, quantity supplied decreases.

Law of demand

If price goes up people buy less, if price goes down people buy more.

What is equilibrium

The state where quantity supplied equals quantity demanded, resulting in a stable market price

What is Disequilibrium

When supply is not equal to demand in a market

what causes a shift on the demand curve

changes in the price of the good, changes in consumer income, changes in consumer preferences, availability of substitute goods, changes in population, changes in consumer expectations about future prices, seasonal factors, changes in the price of complementary goods, and advertising effects.

Quantity Demanded

the amount of a good or service that a consumer is willing and able to purchase at a given price

Complementary goods

Products that are consumed together, where the demand for one increases the demand for the other, such as coffee and sugar.

Substitute goods

Where a good can be replaced by something else for example an apple and orange.

factors affecting the shift of a supply curve

Cost of production, Changes in technology, Number of producers in the market, Weather conditions, Taxes, subsidies, and Government regulations

Ceteris Paribus

All things being equal

Value added tax (VAT)

A tax on items that you purchase

Excess demand

A situation where the quantity demanded of a good or service exceeds the quantity supplied at a given price, often leading to shortages.

Excess supply

Where supply is greater than demand and there are unsold goods in the market

Derived demand

Derived demand is the demand for a good resulting from the demand for another good

Price mechanism

The price mechanism is the process where supply and demand interact to set prices, allocating resources based on scarcity and abundance.

Extension demand/shift right

When demand increases due to it being a shift to the right.

what causes movement along the demand curve

a price increase leading to decreased quantity demanded, sales promotions lowering prices, and seasonal pricing discounts prompting more purchases.

Quantity supplied

is the amount producers sell at a given price.

Shortage

A shortage occurs when the demand for a product exceeds its supply at a given price, leading to unfulfilled consumer needs.

Surplus

The excess of a resource or good available after demand is met, including consumer and producer surplus.

Market supply

The total quantity of a good or service that producers are willing and able to sell at different prices in a given market.

Market demand

The sum of demand from all the consumers in the market

effective demand

The desire for a good or service backed by an ability to pay

interest rates

The percentage charged for borrowing money, influencing consumer spending and investment. Lower rates encourage borrowing, while higher rates discourage it.