Supply & Demand 1
When price increases, quantity demanded decreases; when price decreases, quantity demanded increases.
What is the law of demand?
The point where supply equals demand called?
Market equilibrium
List one factor (other than price) that shifts the demand curve.
Consumer income, tastes, number of buyers, expectations, or price of related goods.
When quantity demanded is greater than quantity supplied at a given price.
What is a shortage?
minimum price for a good or service in a specific market (charging below this price would be illegal)
What is pricing floor
Demand = the entire curve showing willingness to buy at all prices; Quantity demanded = a specific point on the curve at one price.
What is the difference between demand and quantity demanded?
The price at which the supply curve intersects the demand curve.
market clearing price
How does a change in the number of buyers affect demand?
More buyers = demand increases; fewer buyers = demand decreases.
When quantity supplied is greater than quantity demanded at a given price.
What is a surplus?
The amount (quantity) of a good or service that producers are willing and able to sell (make available) at various prices within a specific time frame
What is supply?
What is the difference between normal and inferior goods?
Normal goods = demand rises with income (ex: cars, new clothes). Inferior goods = demand falls with income (ex: bus rides, instant noodles).
If a backpack sells for $100 when the average price is $30, what problem occurs in the market?
A surplus, because the price is too high.
the total amount of money a business takes in.
Revenue
When the price and quantity of a product change but it does not shift the entire curve
What is Movement Along the Demand or Supply Curve
It shows the relationship between quantity supplied and price for a specific good or service
What is the supply curve?
The amount (quantity) that is demanded by consumers at a specific price
Quantity Demanded
the total revenue your business takes in minus the cost of production/input.
Profit
How does an increase in consumer income affect normal goods vs. inferior goods?
Demand for normal goods increases; demand for inferior goods decreases.
Name one factor (other than price) that shifts the supply curve
the cost of inputs, number of sellers, the market due to natural disasters or international events, technology, producer expectations, government policies or regulations
products that can easily replace another product, and products that are used in combination with another product
What a Substitutes vs. Complements
Why is price the only factor that changes quantity demanded but not demand?
Because movement along the demand curve is caused only by a change in price; all other factors shift the entire curve.
explain why both buyers and sellers “win” at equilibrium.
Buyers get products at a fair price they’re willing to pay; sellers earn a profit without leftover goods.
There is an inverse relationship between QD and P.
When price increases, quantity demanded decreases.
When price decreases, quantity demanded increases.
What is theDemand Curve & Law
of Demand
Give one real-world example of how expectations (buyers or sellers) can shift demand or supply.
Buyers delay purchases if they expect future sales; sellers hold back goods if they expect higher prices later.
Name all the factors (other than price) that shifts the supply curve
the cost of inputs, number of sellers, the market due to natural disasters or international events, technology, producer expectations, government policies or regulations
A new technology makes producing smartphones cheaper, while a social media trend boosts consumer desire for the newest phone model. Predict the changes to equilibrium price and quantity.
Quantity will increase significantly; price may rise, fall, or remain stable depending on whether the supply shift or demand shift is stronger.
A government sets a maximum rent price well below equilibrium to help low-income families. What unintended long-term effects might occur in the housing market?
Housing shortages, reduced quality of housing (landlords cut maintenance), and black markets where tenants pay more under the table.
If consumers expect the price of electric cars to rise in the future, what happens to current demand, and what might producers do in response?
Current demand rises; producers may hold back supply to sell at higher future prices.
A government sets the maximum price of gasoline at $2.00/gal when equilibrium is $3.50/gal. Describe three outcomes in the market.
Shortage of gasoline; long lines and rationing; rise of black markets where gas sells illegally at higher prices.
After a hurricane, hardware stores face long lines for generators. Some raise prices, others do not. Which stores experience shortages, and which reach equilibrium faster?
Stores that don’t raise prices have shortages; stores that raise prices reduce excess demand and restore equilibrium faster