Economics supply and demand

Movement along/on the demand curve happens when...

1. Theres a change in people income

2. preferences

3. population increase or decrease (generally increase)

4. intrestests

5. Number of firms in market

Factors that influence supply

1. Cost of production

2. Price of related goods

3. technological advancements

4. Mother nature (enviorment)

5. Monopoly

Movement of and along the curve happens when theres a change in...

1. technological advancements

2. cost of production

3. Consumer Expectations

4. Number of firms in the market

5. Taxes (direct and indirect) and subsidies

Surplus of a product happens when

Price is manipulated by increasing it

If excess supply happens:

1. Related markets will see an increase

2. Overtime demand will catch up but not fully (still a loss)

Supply

Supply is created by those who have the opportunity to satisfy the needs and wants of people

What do price ceilings impose and why are they imposed

A price ceiling puts a imposed maximum of the price of a product. They are usually under market equlibrium to prevent producers from taking unfair advantage of the consumers and make sure as many as possible can afford the product.

How can central banks slow down inflation rates

Central bank can slow down inflation rates by increasing interest rates which cause people to stop taking out so many loans. == makes inflation stable again and helps supply meet demand

Why cant central bank increase interest rates by too much?

Too high I.R = too expensive to borrow money = can lead to a complete stop/halt in demand (AKA ruins the economy

When could a price ceiling be placed above market equlibrium

It is reasonable to put a price ceiling above market equilibrium to make sure producers dont go above a certain amount. It is usually seen in rent.

What is the meaning of a price floor and why are they useful

A price floor is a goverment imposed MINIMUM price at which the producers can sell at. Price floors are used to help protect low wage workers such as farmers. It is also used to reduce demand on a product (usually harmful products such as ciggarates)

What could imposing a price floor lead to?

1. higher unemployment rates

2. Excess supply of products. If its for farmers many crops could go bad leading to the goverment needing to subsidize the farm.

3. Black market trading

Whats another global problem

People have unlimited wants and need while resources to supply those are limited

What does law of demand mean

It states an inverse relationship between price and quantity demanded.

Factors that affect demand

1. Income

The more people earn- the more they want to spend (AKA more demand)

2.Price and Quantity of the product

Too high $=not many sales

Too low $=too MANY sales

3.Preferences

4.Access

What is the study of economics

Scarcity

What does it mean if the demand curve shifts to the left

Theres been a decrease in demand while price stays constant

What does it mean if the demand curve shifts to the right

Theres been an increase in demand while price stayed constant

What does the law of supply state

direct relationship between price of a service or good and its quantity supplied.

market equlibrium meaning

Where supply meets demand (state of balance)

Which factors are included in cost of production

1. Rental of land/space

2. Entreprenuirship

3. Labor- wages, salary, ect

4. Capital- loans, maintanence, investors of money

If prices for everything increase its called...

Inflation

Surplus meaning

Excess supply (too much supply-too little demand)

Reduction of price leads to

Excess demand or shortage (Demand>Supply)

Where can we see excess demand when a price ceiling is imposed

Rent of houses or apartments.

More people want to buy for a cheaper price, less want to sell/rent out their house when they wont make as much profit.

What is inflation

- General increase in prices of almost EVERYTHING

- Fall in purchasing power

Why is there a general increase in price over time (inflation)

Population of the world keeps increasing. More people = more demand

What does purchasing power mean if it decreased

Your money isnt worth as much as it was before. 100kr before could be worth about 90kr now.

Demand

Demand is created by the needs and wants of people

Positives of inflation

Keeps the economy growing (GDP)

The ____ is the ____ that controls almost all _____ in america. Things such as interest rates and loans is included. It is goverment owned.

Central bank and bank(s)

What effects does lower interest rates have

Lower interest rates gets more people to take out loans because its cheaper.

What happens if interest rates are too low and what does it cause

If interest rates are too low, shops will be forced to increase their prices to meet demand now that everyone has more money. It causes inflation

What are some examples of when price ceilings should be used

If it is an essential good. If its essential services (eg medical services) or rental markets.

When should the goverment help subsidize?

When a company/producer is about to go bankrupt or doesnt have enough money to keep their business running

What happens in markets if there is no manipulations (price floors/ceilings)

cosumers getting manipulated

prices become too high or too low

What is a fixed monopoly

A fixed monopoly is when there is only one supplier of a certain good/service who can predetermine the quantity supplied. They can decide the price of their product without manipulating it by deteriming supply.

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