Demand & Supply
Name 2 supply shifters.
The cost of inputs, Technology, Producer expectations, the number of sellers, Natural Disasters, government policy
Do economics and government relate/overlap?
Yes!
Where is the equilibrium point?
The intersection of supply and demand curves (the kiss)
What is a market?
Any place buyers and sellers come together to exchange goods and services
If a curve shifts right, it is...
What does a demand curve look like? (show me with your arms)
Slopes downward.
What is equilibrium?
Where demand = supply
Who sets the price in perfect competition?
The market makes the price, the firms have no control because they are all selling an identical product
What are complementary goods?
Goods that you buy together (Peanut butter and jelly, pasta and sauce)
What is an example of a black market?
What are 2 examples of the government setting a price control?
Price floor: minimum wage
Price ceiling: rent control
Give 1 example of a legal monopoly.
Resource monopoly: stone, mining
Government-created: patents, licenses, franchise
Natural monopoly: gas, water, electric (more efficient having 1 person produce)
What will happen to the demand of Nike shoes if it is the shoe used by many famous athletes?
Demand will increase/shift to the right (Demand Determinant: Change in taste/preference)
What is elasticity?
Measure of responsiveness/sensitivity to changes in price
What are the two market structures that have LOW barriers to entry and are therefore very competitive
Perfect competition & Monopolistic competition
What happens to the demand curve when a change in price occurs?
The curve does NOT shift; there is only a movement along the curve
What will happen to the supply and/or demand of coffee if the cost of coffee beans increases?
The supply of coffee will decrease/shift to the left (Supply Determinant: Cost of inputs)
Why are toothbrushes, gasoline, deodorant, and life-saving drugs inelastic?
We will demand the same quantity at ANY price. We do not respond to changes in price because we still need to buy it.
What is a surplus? Where is it in relation to equilibrium?
A surplus is when we have more products than what is needed. A surplus can be found at any price point above equilibrium.
How is a cartel different from collusion?
Cartel: an organization that is established to set prices/production
Collusion: companies that agree to set prices/production