Supply and Demand: Understanding Market Equilibrium

These flashcards cover key concepts from the lecture on supply and demand, focusing on market equilibrium, demand and supply curves, elasticity, and real-world applications.

Demand Curve

A graph showing the relationship between price and quantity demanded, typically sloping downward.

Movement Along the Demand Curve

Changes in quantity demanded due to a change in the price of the good itself.

Shifting the Demand Curve

Movement of the entire demand curve caused by changes in factors other than the price of the good.

Determinants of Demand

Factors that influence the demand for a good, including income, tastes, prices of related goods, population, and expectations.

Supply Curve

A graph showing the relationship between price and quantity supplied, typically sloping upward.

Movement Along the Supply Curve

Changes in quantity supplied due to a change in the price of the good itself.

Shifting the Supply Curve

Movement of the entire supply curve caused by changes in factors other than the price of the good.

Determinants of Supply

Factors that influence the supply of a good, including input costs, technology, taxes/subsidies, number of sellers, and expectations.

Market Equilibrium

The point where the supply and demand curves intersect, determining the equilibrium price and quantity.

Surplus

A situation where quantity supplied exceeds quantity demanded, typically occurring at prices above the equilibrium.

Shortage

A situation where quantity demanded exceeds quantity supplied, typically occurring at prices below the equilibrium.

Elasticity

A measure of responsiveness of quantity demanded or supplied to changes in price.

Price Ceiling

A government-imposed maximum price for a good, often leading to shortages.

Price Floor

A government-imposed minimum price for a good, often leading to surpluses.

Dynamic Pricing

A strategy where prices are adjusted based on current demand.

Normal Goods

Goods for which demand increases as consumer income rises.

Substitutes

Goods that can be used in place of each other; an increase in the price of one leads to an increase in demand for the other.

Complements

Goods that are typically consumed together; an increase in the price of one leads to a decrease in demand for the other.