Supply And Demand

Demand

The different quantities of goods that consumers are willing and able to purchase.

Inverse relationship between price and quantity demanded

When the price increases, the demand decreases, and when the price decreases, the demand increases.

Substitution Effect

When the price of a product goes up, consumers buy less of it and more of a substitute product (and vice versa).

Income Effect

When the price of a product goes down, consumers purchase more of it.

Law of diminishing marginal utility

As you consume more of a product, the additional satisfaction you get from each additional unit consumed decreases.

Factors that influence the demand for a product, including taste and preferences, number of consumers, price of related goods, income, and future expectations.

Determinants of the demand curve

Supply

The different quantities of a good that sellers are willing and able to sell at different prices.

Shift in supply curve

Caused by anything but **PRICE**

Factors that influence the supply of a product, including the cost of production of inputs, number of sellers, technology, and government actions.

Determinants of the supply curve

Equilibrium

The point where the quantity demanded equals the quantity supplied in the market.

Consumer Surplus

The economic benefit or gain that consumers receive when they are able to purchase a product at a price lower than what they are willing to pay.

Producer Surplus

The total amount that a producer benefits from producing and selling a quantity of a good at the market price.

Tariffs

Taxes imposed on imported goods.

Price ceiling

The maximum price legally allowed for a product, set to make it more affordable by preventing the price from reaching equilibrium.

Price floor

The minimum legal price a seller can sell a product, set to keep the price high by preventing it from falling to equilibrium.

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without trade

with trade

with tarriff