AP Macro - Determinants of Supply and Demand

Is the following a determinant of supply or demand: change in consumer income

Determinant of Demand

• + income = more demand in normal good / less demand in inferior good

• - income = less demand in normal good / more demand in inferior good

Is the following a determinant of supply or demand: Change in Consumer Taste

Determinant of Demand

• consumers often change their minds on which products to buy

• caused by advertising, fashion trends, changes in season, etc.

Is the following a determinant of supply or demand: Substitutes - Interchangeable Products

Determinant of Demand

• Higher Price for Normal Good = More Demand for Substitute

• Lower Price for Normal Good = Less Demand for Substitute

Is the following a determinant of supply or demand: Change in Complements

Determinant of Demand

• Complements: products that increase the use of other products

• Increased Price of a Product = Lower Demand for Complement

• Decreased Price of a Product = Higher Demand for Complement

Is the following a determinant of supply or demand: Change in Consumer Expectation

Determinant of Demand

• Consumers expect to need it

Is the following a determinant of supply or demand: Change in # of Consumers

Determinant of Demand

• More Consumers = More Demand

• Less Consumers = Less Demand

Is the following a determinant of supply or demand: Change in Price of Resources

Determinant of Supply

• Increased Cost of Resources = Supply SHIFT to the Left

• Decreased Cost of Resources = Supply SHIFT to the right

Is the following a determinant of supply or demand: Change in Productivity

Determinant of Supply

• Increased Productivity = Supply SHIFT to the Right

• Decreased Productivity = Supply SHIFT to the Left

• Caused by workers (training, education, and treatment) and technology

Is the following a determinant of supply or demand: Change in Technology

Determinant of Supply

• New / Better Technology = More Efficiency and Productivity = Supply SHIFT to the Right

Is the following a determinant of supply or demand: Change in Government Policies (Taxation)

Determinant of Supply

• Seen as a cost of production

• More Taxes = Less Supply

Is the following a determinant of supply or demand: Change in Price of Related Goods/Services

Determinant of Supply

• business that can produce related products may shift production to another product if they can make greater profits

Is the following a determinant of supply or demand: Change in Government Policies (Subsidy)

Determinant of Supply

• Subsidy: Payment to an Individual, Business, or Group to Encourage or Protect a Certain Type of Economic productivity

• More Subsidies = Supply SHIFT to the right

Is the following a determinant of supply or demand: Change in Government Policies (Regulation)

Determinant of Supply

• Less Regulation = Lower Production Cost and More Output = Supply SHIFT to the right

Is the following a determinant of supply or demand: Change in # of Producers

Determinant of Supply

• More Producers = More Supply

• Less Producers = Less Supply

Is the following a determinant of supply or demand: Change in Expectations

Determinant of Supply

• affect anything from cost of input to the demand for the firms’s products