1.2.2, 1.2.4 Demand and Supply Flashcards
Define demand
The quantity of goods and services consumers are willing and able to buy at a given price over a period of time
What does the law of diminishing marginal utility state?
The marginal utility of a good or service declines as more of it is consumed by an individual
What does the demand curve show?
The demand curve shows how demand for a good/service varies according to its price
Describe a demand diagram (3)
- X-axis: quantity (Q)
- Y-axis: price (P)
- the demand curve is downwards sloping (inverse relationship)
What causes a movement along the demand curve?
A change in the price
- inc. in P = contraction in QD
- dec. in P = extension in QD
What does a shift in the demand curve represent?
Outward/rightward shift: inc. in D
Inward/leftward shift: dec. in D
What causes a shift in the demand curve? (6)
Non-price factors only:
- trends/tastes/fashion
- price of substitutes/complements
- seasonal factors
- changes in population
- changes in real consumer income
- advertising
Define supply
The quantity of goods and services that firms are willing and able to supply at a given price
What does the supply curve show?
The supply curve shows how supply for a good/service varies according to its price
Describe a supply diagram (3)
- X-axis: quantity (Q)
- Y-axis: price (P)
- the supply curve is upwards sloping (positive relationship)
What causes a movement along the supply curve?
A change in price
- inc. in P = extension in QS
- dec. in P = contraction in QS
What does a shift in the supply curve represent?
Outwards/rightwards shift: inc. in S
Inwards/leftwards shift: dec. in S
What causes a shift in the supply curve? (5)
Non-price factors only:
- any change in the costs of production
- indirect taxes
- subsidies
- changes in technology
- changes in weather/natural factors
