Economics Test 2 Supply/Demand

The amount of goods or service that consumers are willing and able to buy at different prices

Demand

Changes in income, preferences/tastes, expectations, number of buyers, and prices of related goods.

causes of demand shift

demand curve shifts right

demand increases

demand curve shifts left

demand decreases

The specific amount consumers want to buy at a specific price

quantity demanded

A change in the price of the good itself

causes of a change in quantity demanded

Demand = whole curve
Quantity demanded = one point on the curve

Demand vs Quantity demanded

As price increases

quantity demanded decreases

As price decreases

quantity demanded increases

a product can be used instead of another product
Example:coke vs pepsi

Substitute

what happens to demand for a product if the price of its substitute increases?

Demand for the product increases

Complement

A product that is used together with another product
Example : cars & gasoline

What happens to demand for a product if the price of its complement increases?

Demand for the product decreases

Y - axis = Price & X- axis = Quantity
The curve usually slopes downward

How do you read a demand curve

The amount of a good or service that producers are willing and able to sell at different prices

supply

Changes in input costs, technology, taxes/subsidies, expectations, number of sellers, and other production conditions

Causes of supply to shift

When supply increases

supply shifts right

When supply decreases

supply shifts left

What is quantity supplied

the specific amount producers want to sell at a specific price

Change in the price of the good itself

Causes a change in quantity supplied

Supply vs quantity supplied

Supply= whole curve
Quality supplied = one point on curve

relationship between price and quantity supplied

as price increases quantity supplied increases
as price decreases quantity supplied decreases

How does technology affect supply?

Better technology usually increases supply because producers can make goods more efficiently.

How does higher input prices affect supply?

Higher input costs usually decrease supply because production becomes more expensive

How do lower input prices affect supply?

Lower input costs usually increase supply

How do you read a supply curve?

Y axis = Price and X axis Quantity
The curve usually slopes upward

Zoning rules can limit where and what types of housing can be built, reducing the available supply.

how can zoning restrict housing supply?

How can restricted housing supply contribute to discrimination?

If zoning limits certain types of housing, it can make housing more expensive or less available, which disproportionately make it harder for some groups to access certain neighborhoods

what determines prices in a competitive market?

Supply and demand interact to determine the market price.

What happens when demand increases?

Usually price increases and quantity increases.

What happens when demand decreases?

Usually price decreases and quantity decreases.

What happens when supply increases?

Usually price decreases and quantity increases.

What happens when supply decreases?

Usually price increases and quantity decreases

What happens to quantity demanded when price increases?

Quantity demanded decreases.

What happens to quantity demanded when price decreases?

Quantity demanded increases.

What happens to quantity supplied when price increases?

Quantity supplied increases.

What happens to quantity supplied when price decreases?

Quantity supplied decreases

What does a high price signal to sellers?

There may be an opportunity to earn more by producing/selling more

What does a high price signal to buyers?

The product is more expensive, so they may buy less or look for alternatives.

What does a low price signal to sellers?

There may be less incentive to produce the product.

What does a low price signal to buyers?

The product is more affordable, so they may buy more.

What is equilibrium price?

The price where quantity supplied = quantity demanded.

What is equilibrium quantity?

The quantity bought and sold at the equilibrium price.

How do you find equilibrium on a graph?

Find where the supply and demand curves intersect.

What does the intersection of supply and demand represent?

Equilibrium price and equilibrium quantity

What is a surplus?

When quantity supplied > quantity demanded.

What usually causes a surplus?

A price above equilibrium.

What happens to prices when there is a surplus?

There is pressure for prices to fall

What is a shortage?

When quantity demanded > quantity supplied.

What usually causes a shortage?

A price below equilibrium.

What happens to prices when there is a shortage?

There is pressure for prices to rise.