Economics Unit 2 Study Guide: Supply and Demand

Vocabulary flashcards covering core terms, determinants of supply and demand, and market equilibrium principles from Economics Unit 2 Study Guide.

1. A famous person sets a new fashion trend that everyone starts wearing. Which determinant of demand would cause this demand increase?

Consumer Tastes and Preferences

2. What does a demand curve (also known as a market demand curve) represent?

A graph showing the quantity of a product demanded by consumers at various prices.

3. In what direction does a demand curve appear on a graph, from left to right?

Downward (sloping downward from left to right).

4. Goods that consumers demand more of when their income rises are called _____ goods.

Normal goods.

5. If unemployment goes up people will naturally consume less goods. Which determinant of demand would cause this demand decrease?

Income (Consumer Income).

6. During summer months, restaurants at vacation destinations see a huge increase in sales. What determinant of demand would cause this demand increase?

Market Size (Number of Buyers).

7. Which factor is affecting demand if many consumers are switching from traditional telephones to cell phones?

Substitutes.

8. Which factor is affecting demand if the increase in sales of digital cameras is leading to an increase in photo printer sales?

Complements.

9. What are products that consumers demand less of when their incomes rise?

Inferior goods.

10. What factor is affecting demand if the Smith family buys next year's summer clothes in August to benefit from end-of-season sales?

Consumer Expectations.

11. Why would a drop in hotel visits in a city that has been evacuated due to a hurricane be an example of market size affecting demand?

Because the evacuation temporarily reduced the number of active consumers in that market.

12. If Joe buys $10\,\text{pounds}$ of ham in March because he hears prices will rise in April, which factor of demand is likely affecting his decision?

Consumer Expectations.

13. The willingness and ability of producers to offer goods and services for sale is also known as _____ (hint: not demand)

Supply.

14. In what direction, left to right, do supply curves appear on a graph?

Upward (sloping upward from left to right).

15. What determinant of supply is affected if car manufacturers begin using robots on their assembly lines instead of humans?

Technology.

16. Would a tax on imported sugar be more likely to reduce or increase the supply of a sugary cereal?

Reduce (taxes increase input costs, which decreases supply).

17. If the government regulated construction sites to improve worker safety would supply likely see an increase or decrease?

Decrease (regulations increase costs of production).

18. Equilibrium price is the price at which quantity of product demanded by consumers and quantity of product supplied by producers is _____

Equal.

19. The point at which demand and supply intersect on a graph is also known as what?

Market Equilibrium Point.

20. Why would producers want to raise prices when there is a shortage in the market?

Because demand exceeds supply, enabling producers to increase profit and balance market demand.

21. Why would producers want to reduce prices when there is a surplus in the market?

To clear unsold inventory and encourage consumers to purchase excess supply.

22. How do input costs (costs of resources) affect supply?

Higher input costs decrease supply, while lower input costs increase supply.

23. Higher prices generally motivate suppliers to do what?

Produce and supply more goods.

24. Lower prices generally motivate consumers to do what?

Demand and purchase more goods.

25. If a producer supplies $25$ pies, market equilibrium is reached when consumers demand how many pies?

$25$ pies.

26. If a pants manufacturer has a surplus of $2$ pants when they're priced at $14\,\text{dollars}$ each and a shortage of $2$ shirts at $10\,\text{dollars}$ each, market equilibrium is likely at what price?

$$12\,\text{dollars}$$

27. When consumers demand more goods/services at every price, will equilibrium price rise or fall?

Rise.

28. When producers supply more to the market, will equilibrium price rise or fall?

Fall.

29. Will consumers seek bargain prices for a good if there is a shortage or a surplus?

Surplus.

30. Will producers raise prices for a good if there is a shortage or a surplus?

Shortage.

31. If a company supplies $20$ shoes, and $20$ shoes are demanded by consumers, what has been achieved?

Market Equilibrium (Equilibrium Quantity).

32. At a cost of $10\,\text{dollars}$, Joe's Audio store supplies $30$ DVDs and $30$ DVDs are demanded by consumers. Does the $10\,\text{dollars}$ represent equilibrium price or quantity?

Equilibrium Price.

33. If a hurricane sharply decreased the supply of oranges, would equilibrium price increase or decrease?

Increase.

34. If a type of hat went out of style, and demand went down, would equilibrium price increase or decrease?

Decrease.

35. Write out all of the determinants for Supply and Demand below:

Determinants of Demand: Income, Consumer Tastes and Preferences, Consumer Expectations, Market Size, Substitutes, Complements. Determinants of Supply: Input Costs, Technology, Government Regulations and Taxes, Producer Expectations, Number of Suppliers.

36. Draw each of the following graphs: 1. Demand increase 2. Demand Decrease 3. Supply Increase 4. Supply Decrease

1. Demand Increase: Curve shifts right. 2. Demand Decrease: Curve shifts left. 3. Supply Increase: Curve shifts right. 4. Supply Decrease: Curve shifts left.