Demand
What is the Law of Demand?
As price increases, quantity demanded decreases (and vice versa).
What is the Law of Supply?
As price increases, quantity supplied increases (and vice versa).
A movement along the demand or supply curve is caused by what?
A change in price.
What does elasticity measure?
How sensitive quantity is to a change in price.
Is insulin an elastic or inelastic good? Why?
Inelastic, because it’s a necessity with few substitutes.
What does ceteris paribus mean in economics?
All other things held equal.
What is quantity supplied?
The amount producers are willing and able to sell at a given price.
A shift of the demand or supply curve is caused by what?
A factor other than price (like income, technology, or preferences).
What is elastic demand?
When quantity demanded changes a lot with price changes.
If the price of Pepsi rises, what happens to demand for Coke?
It increases — they are substitute goods.
What is the difference between demand and quantity demanded?
Demand is the overall desire for a good; quantity demanded is the amount purchased at a specific price.
On a supply graph, which axis represents price?
The vertical (Y) axis.
What happens to the demand curve when income rises for normal goods?
The demand curve shifts right (demand increases).
What is inelastic demand?
When quantity demanded changes very little with price changes.
If wages for factory workers rise, what happens to supply?
Supply decreases — costs go up.
What happens to the demand for a good when its price decreases?
Quantity demanded increases.
What happens to quantity supplied when prices fall?
Producers supply less.
What happens to the supply curve when the cost of inputs rises?
The supply curve shifts left (supply decreases).
Give one example of an inelastic good.
Insulin, gasoline, or electricity.
If new technology makes production cheaper, what happens to the supply curve?
It shifts right (increases).
What is a market demand curve?
The total demand from all consumers for a good at each price.
What is market supply?
The total supply from all sellers at each price.
Name two factors that can shift the supply curve.
Changes in technology, input costs, number of firms, taxes/subsidies, or price expectations.
What does an elasticity coefficient less than 1 mean?
Demand or supply is inelastic.
If consumers expect prices to rise soon, what happens to demand today?
Demand increases now.