Equilibrium
What is equilibrium price?
The price at which quantity demanded equals quantity supplied.
What is the law of supply?
As price increases, quantity supplied increases.
What is the law of demand?
As price increases, quantity demanded decreases
What is an incentive?
A benefit or cost that influences behavior.
What is elasticity in economics?
the sensitivity of quantity demanded or supplied to a change in price.
What happens when supply exceeds demand?
A surplus occurs
How dose improved technology affect supply?
It increases supply by reducing production costs.
What is the term for the sum of all individual demands in a market?
Market demand
How do subsidies impact the supply of a good?
They increase supply by lowering production costs.
What type of demand do necessities like insulin have?
inelastic demand
What effect does a shortage have on prices?
Prices tend to rise.
What happens to supply when production costs rise?
supply decreases
What happens to the demand curve if consumers expect prices to rise in the future?
It shifts to the right
How would a great farming season affect the price of crops?
Prices decrease due to an increase in supply.
What happens to the quantity demanded when a good is elastic and its price increases?
Quantity demanded decreases significantly.
How does a market naturally correct a surplus?
Prices fall, increasing demand
What is a subsidy, and how does it affect supply?
: A government payment to support businesses; it increases supply.
What is an inferior good?
a good that demand rises as income falls
If the government provides tax breaks for electric cars, how does that affect gas-powered car sales?
Demand for gas-powered cars decreases.
What is the difference between elastic and inelastic supply?
Elastic supply responds greatly to price changes, while inelastic supply does not.
What is equilibrium quantity?
The quantity where supply and demand intersect.
How do expectations about future prices affect supply?
If prices are expected to rise, producers may reduce supply now.
What is the difference between a movement along the demand curve and a shift in the demand curve?
Movement is due to price changes; a shift occurs due to other factors (e.g., income, preferences, expectations)
What happens to farm labor wages if an abundant crop season increases demand for workers?
Wages rise due to increased demand for labor.
What is unit elastic demand?
A one-to-one change in quantity based on price (45-degree demand curve).