Supply
What is the definition of supply in economics?
Supply is the quantity of a good or service that producers are willing and able to sell at different prices during a given time period.
What is the definition of demand in economics?
Demand is the quantity of a good or service that consumers are willing and able to purchase at different prices over a specific time period.
What is market equilibrium? (+50 for saying the other name for it)
Market equilibrium is the point at which the quantity supplied equals the quantity demanded at a particular price (Market Clearing Price).
Define a shortage in the market.
A shortage occurs when the quantity demanded exceeds the quantity supplied at a given price.
Name a specific event that can cause a shift in supply and explain why.
A natural disaster, such as a hurricane, can cause a shift in supply by damaging production facilities, thereby decreasing supply.
What is the law of supply?
The law of supply states that all else being equal, an increase in price results in an increase in quantity supplied.
What is the law of demand?
The law of demand states that all else being equal, an increase in price results in a decrease in quantity demanded.
How is equilibrium price determined?
Equilibrium price is determined by the intersection of the supply and demand curves, where the amount consumers want to buy equals the amount producers want to sell.
Define a surplus in the market.
A surplus occurs when the quantity supplied exceeds the quantity demanded at a given price.
Describe how an increase in consumer income can affect demand for luxury goods.
An increase in consumer income typically increases demand for luxury goods, as more consumers can afford to purchase them.
Generally, how does technology affect supply?
Technological advancement generally leads to improvements in supply.
What is the impact of a change in consumer preferences on demand?
A change in consumer preferences can increase or decrease demand for certain goods; for example, if consumers prefer electric cars over gasoline cars, demand for electric cars will rise.
What happens to the market when there is excess supply?
When there is excess supply (surplus), prices tend to fall as producers lower prices to encourage sales.
Give an example of a product that might experience a shortage.
A popular gaming console during the holiday season may experience a shortage due to higher demand than supply.
What role does government intervention (like taxes or subsidies) play in affecting supply or demand? Provide an example.
Government intervention can affect supply by imposing taxes that increase production costs (reducing supply) or providing subsidies that lower costs (increasing supply). For example, a subsidy for electric cars can increase their supply.
How does an increase in production costs affect supply?
An increase in production costs generally decreases supply because producers may be less willing or able to produce the same quantity at existing prices.
How does consumer income affect demand for normal goods?
As consumer income increases, the demand for normal goods typically increases because consumers have more purchasing power.
Explain what occurs at a market when demand exceeds supply.
When demand exceeds supply (shortage), prices tend to rise as consumers compete to purchase the limited goods available.
How do producers typically respond to a surplus?
Producers typically respond to a surplus by lowering prices to increase sales and reduce excess inventory.
Explain how changes in consumer preferences (such as trends) can lead to shifts in demand, with a specific example.
If a health trend promotes plant-based diets, demand for plant-based food products will increase as more consumers prefer these options over meat products.
How does an increase of the number of suppliers in a market affect supply?
An increase in the number of suppliers in a market typically increases overall supply, as more producers contribute to the total quantity available for sale.
Discuss how substitutes can affect demand.
If the price of a substitute good (e.g., butter vs. margarine) decreases, the demand for the original good may decrease as consumers shift to the cheaper substitute.
Describe the concept of price ceilings and their impact on supply and demand.
A price ceiling is a maximum price set by the government for a good or service. It can lead to shortages when the price is set below the equilibrium price, as demand exceeds supply at that price.
Explain the long-term effects of persistent shortages on the market.
Persistent shortages can lead to increased prices, reduced consumer satisfaction, and may incentivize new entrants to the market to supply the good or service.
Discuss how global events (like a pandemic) can significantly impact both supply and demand, citing a recent example
The COVID-19 pandemic significantly impacted supply chains, causing shortages of products like toilet paper while also increasing demand for home delivery services and hygiene products.