AP Macroeconomics 1.4–1.6: Supply and Demand

Key vocabulary, laws, shifters, equilibrium, shortages, surpluses, price ceilings, and price floors.

Law of demand

There is an inverse relationship between price and quantity demanded.

Demand v.s Quantity demanded

Demand is the whole line while quantity demanded is a dot on the line

what changes quantity demanded

only a change in price

taste/preference, number of consumers, prices of related goods, income, expectations

five determinates of demand

normal goods

Income increases, so does demand

Law of supply

There is a positive/direct relationship between price and quantity supplied

supply vs quantity supplied

Supply is the whole line and quantity supplied is a dot on the line

what can change quantity supplied/demanded

ONLY price

price of resources/inputs, number of producers, technology/productivity, government intervention (taxes or subsidies) , expectations of future profit

Five determinates of supply

Increase and decrease in demand or supply

increase shifts rights and decrease goes left

demand and supply graph axes

Price is on y axis and quantity on x axis

Price =

Quantity

Shifter =

The whole curve

inferior goods

income increases demand decreases