Ultimate Study Guide: Supply and Demand

Flashcards covering key vocabulary related to Supply and Demand concepts.

Demand

The desire, ability, and willingness to buy a product.

Law of Demand

When the price of a good decreases, the quantity demanded increases (and vice versa).

Quantity Demanded

The amount of a product people are willing to buy at a specific price.

Demand Curve

A graph that shows the relationship between price and quantity demanded (slopes downward).

Supply

The amount of a product offered for sale at various prices.

Law of Supply

As the price increases, the quantity supplied increases (and vice versa).

Quantity Supplied

The amount of a product a producer is willing to sell at a specific price.

Supply Curve

A graph showing the relationship between price and quantity supplied (slopes upward).

Market Equilibrium

The point where supply equals demand, with no surplus or shortage.

Surplus

When quantity supplied is greater than quantity demanded.

Shortage

When quantity demanded is greater than quantity supplied.

Demand Shifters (TIPE)

Factors that can cause a shift in demand: Tastes/Preferences, Income, Price of Related Goods, Expectations.

Substitutes

Goods that can replace one another, where an increase in the price of one leads to an increase in the demand for the other.

Complements

Goods that are used together, where an increase in the price of one leads to a decrease in the demand for the other.

Equilibrium Price

The price where quantity demanded equals quantity supplied.

Equilibrium Quantity

The amount bought and sold at the equilibrium price.

Scenario 1: Celeb Endorsement

A scenario where a celebrity increases demand for a product.

Scenario 2: Input Cost Drop

A scenario where a decrease in input costs increases supply.

Scenario 3: Both Move!

A scenario where both demand and supply increase, leading to a new equilibrium.