lec 4 part 2 ACDC Economics: Supply and Market Equilibrium Study Guide

Vocabulary flashcards covering the law of supply, the five shifters of supply, and market equilibrium concepts based on the lecture notes.

Law of Supply

The economic principle stating there is a direct relationship between price and the quantity supplied; as price increases, the quantity produced increases.

Incentive for Supply

An increase in price that encourages dairy farmers to produce more because they want to make more profit.

Supply Curve Slope

An upward sloping line on a graph representing that when price increases, the quantity supplied also increases.

Change in Quantity Supplied

A movement along the fixed supply curve caused specifically by a change in the price of the product.

Shifts in Supply

Changes that move the entire supply curve, where an increase is reflected by a shift to the right and a decrease is a shift to the left.

Price of Inputs or Resources

A supply shifter where the cost of key components needed for production, such as dairy cows, affects the ability to produce milk.

Number of Producers

A supply shifter where an increase in the total amount of dairy farmers leads to an increase in the supply of milk.

Technology

A supply shifter related to productivity; for example, advanced milking machines shift the supply curve for milk to the right.

Subsidy

Government involvement where money is given to firms to encourage them to produce more, shifting the supply curve to the right.

Tax

A form of government involvement that takes away producers' money, causing supply to shift to the left and decrease.

Future Expectations

A supply shifter where producers hold back current supply to sell later if they believe they can make more profit in a few weeks.

Market Equilibrium

The point where the supply and demand curves intersect, setting the price and quantity where the quantity demanded exactly equals the quantity supplied.

Market Clearing Price

Another term for the equilibrium price, which in the provided example was set at $3$ per gallon of milk.

Disequilibrium

A state in the market where price is not at equilibrium, leading to either a surplus or a shortage.

Surplus

A condition where the quantity supplied is greater than the quantity demanded; in the example, a price of $5$ led to a surplus of $40$ gallons of milk.

Shortage

A condition where the quantity demanded is greater than the quantity supplied; in the example, a price of $1$ led to a shortage of $70$ gallons of milk.