Basics
The amount of product consumers want to buy
What is demand?
The interaction of supply and demand when they balance one another and become stable.
What is equilibrium?
These types of shifts refer to changes in tastes of consumers.
Changes in consumer preferences?
The price of cars increases, therefore businesses start making more cars.
What is an increase in supply?
The amount of product producers want to sell
What is supply?
The price is above equilibrium level. Quantity supplied is more than quantity demanded.
What is surplus?
Off brand or generic products that have a lower demand when income increases.
What are inferior goods?
It becomes popular to own a Stanley, therefore consumers start buying them more.
What is an increase in demand?
Price decreases, the amount demanded increases
What is the Law of Demand?
Quantity demanded is greater than quantity supplied.
What is shortage?
The cost of raw materials and labor changes, which affects the price of production.
what are changes in input prices or costs?
Starbucks sells lattes for $6 and strawberry açaí refreshers for $4 which are both a source of caffine
What are substitutes?
Price increases, the amount supplied increases.
What is the law of supply?
Measures how quantity responds to price changes.
What is Elasticity?
If producers anticipate prices will rise later on they will hold off on their supply to sell it at a higher price later.
What are changes in expectations of future prices.
More people buy cars, so gas prices increase.
What are complements?
The law of demand has this type of relationship.
What is an inverse relationship?
The price ensures buyers will pay the price the seller is willing to sell it at.
What is market clearing price?
Trends, cultural change, advertising, and new information.
What drives shifts in supply in demand?
There are more people that want to attend a concert than there are tickets available.
What is a shortage?