Chapter 29: Demand and Supply

Market

a place where buyers and sellers exchange goods and services

Monopoly Market

only one seller of one product

Demand

the quantity of a product that consumers are prepared to buy at different prices

Supply

the quantity of a product that suppliers are prepared to sell at different prices

What happens when the demand curve shifts to the right? And to the left?

Right: Demand has increased

Left: Demand has decreased

A substitute product

a similar product that can be used in place of another product (Apple IPhone and Samsung Phone)

Complementary goods

Are goods that are joint in demand. If you buy one, there will be demand for the other (chargers, cases)

What happens when the supply curve shifts to the right? And to the left?

Right: Supply has increased

Left: Supply has decreased

Subsidy

An amount of money given to a business by the government or the EU

Market equilibrium

when quantity demanded equals quantity supplied

What happens when there is increased supply but unchanged demand?

Decrease in price

What happens when there is decreased supply but unchanged demand?

Increase in price

The Black Market

the market in which goods and services are sold and bought illegally

The law of demand

states that as the price of a good or service increases, the quantity demanded will decrease and vice versa

The law of supply

States that as the price of a good or service increases, the quantity supplied will increase and vice versa

Effects of the demand curve

Advertising - more advertising = more demand

Fashion - If a product is in fashion/trend = more demand

Substitute good - if the price of this falls = less demand

Exceptions to the law of demand

Price for medication / life threatening diseases (insulin for type 1 diabetes)

Addictive - addicted consumers may continue to buy even if price increases

Luxury items - higher price can make certain products more attractive (sports cars)

Effects on the supply curve

Technology - if it’s used = increased supply

Costs of production - high production costs = decreased supply

Weather (crops) - bad weather = decreased supply

Exceptions to the law of supply

Oil - if a supplier expects prices to increase in the future they may withholds their supply

If you buy on the black market are you protected from your consumer laws?

No