13. Demand and Supply Flashcards
What is the definition of Demand?
The quantity of a good and service that an individual is willing and able to buy at a given price
What is Effective demand?
A want that is backed up by the ability to pay so is therefore limited or finite.
What is the Law of Demand?
As the price goes up, quantity demanded goes down, ceteris paribus.
What are the rules when drawing a Demand Curve?
Title
Price on the Y-axis with units
Quantity Demanded on the X-axis with units
A labelled demand curve with D or D’
Changes in Qd or P must be labelled with arrows showing the direction of movement
What would a shift to the right indicate on a demand curve?
Indicate an increase in quantity demanded
What would a shift to the left indicate on a demand curve?
Indicate a decrease in quantity demanded
What is disposable income?
This is income after taxes are paid and any transfers are received.
What could cause a shift of the demand curve to the right?
Cut in direct taxes
Increase in the price of a substitute
The decrease in the price of a complementary good
What could cause a shift of the demand curve to the left?
Increase in tax
Decrease in the price of a substitute
Increase in price of a complementary good
What is a Subsitute good?
These are goods and services that can be used in place of each other.
What is a Complementary good?
These are goods and services that go well with each other.
What is the definition of Supply?
The quantity of a good or service a supplier is willing and able to supply at a given price
What are the rules when drawing a Supply Curve?
Title
Price on the Y-axis with units
Quantity Supplied on the X-axis with units
A labelled demand curve with S or S’
Changes in Qs or P must be labelled with arrows showing the direction of movement
What is the Law of Supply?
As price of a good or service increases the quantity supplied will increase – ceteris paribus
What may cause a change in Supply?
Change in price Cost of production Productivity Indirect tax changes Subsidies The price of a related good A tariff Environmental, Legal, Cultural and Political factors
