Economics Supply and Demand

Adam Smith

Scottish economist who wrote the Wealth of Nations a precursor to modern Capitalism.

The Wealth of Nations

addresses how self interest, competition and the invisible hand interact and play into a nations economy

Self-Interest

That which each firm, property owner, worker, and consumer believes is best for itself and seeks to obtain.

competition

regulator of economic activity and keeps self interest in check

Invisible Hand

a term coined by Adam Smith to describe the self-regulating nature of the marketplace(used to argue for anti-gov regulation)

market structure

market classification according to number and size of firms, type of product, and type of competition; nature and degree of competition among firms in the same industry

Supply

Willingness and ability of sellers to produce and offer

Demand

willingness and ability of buyers to purchase

Quantity Supplied

Number of units of a good produced and offers for sale at a specific price

quantity demanded

number of units of a good purchased at a specific price

Law of Supply

as price increases the quantity of supplied goods increases

direct relationship

Law of Demand

If price increases then demand decreases

price and quantity demanded have a inverse relationship

Surplus

excess of goods compared to demand

occurs at price above equalibrium

Shortage

lack of goods compared to demand

Equilibrium

quantity demanded equals quantity supplied and is where the supply and demand curve meet

Perfectly Competitive

many sellers, same products, price based on supply and demand with easy entry to the market

Adam S. Approved

Monopolistic

one seller, hard entry to the market and the price set(high as possible) by the business

Monopolistic competitive

many sellers, differentiated products, easy entry, prices set by supply and demand with business influence

oligopolistic

Few sellers with nearly identical products

hard entry to the market and some price control

Land

All natural resources used to produce goods and services

Labor

human effort used to produce goods and services

Capital

the resources made and used by ppl to produce or distribute goods and services

Entrepreneurship

Skill of combining the other factors(land, labor, & capital) to create a successful business(not easy)