2. Supply and Demand

Question 1

What are Markets?

Answer 1

Situation where consumers and producers can negociate the exchange of goods/ services

Question 2

Quantity demanded

Answer 2

Total amount that consumers desire to purchase in some period of time

Question 3

Quantity bought

Answer 3

Actual Purchases

Question 4

Is quantity a flow or a stock?

Answer 4

Flow, reliant on time

Question 5

What is the law of demand

Answer 5

Empirical observation that when the price of a product falls, people demand larger quantities

Question 6

Quantity Supplied

Answer 6

Total amount of a product that firm desire to sell in some time period. Firms are willing to offer for sale NOT quantity sold

Question 7

Law of supply

Answer 7

When the price of a product rises, firms offer more of it for sale

Question 8

What is the demand curve?

Answer 8

A curve that shows the relationship between the price of a product and the quantity of the product demanded
Downwards sloping

Question 9

What is the supply curve?

Answer 9

A graph of the relationship between the rpice of a goof and the quantity supplied
Upwards sloping

Question 10

What is excess demand?

Answer 10

When quantity demanded is more than quantity supplied

Question 11

What is excess supply?

Answer 11

When quantity supplied is more than quantity demanded

Question 12

What is the equilibirum quantity and price?

Answer 12

Price-quantity pair at which both buyers and sellers are satisfied

Question 13

Adjustement to the equilibrium

Answer 13

Price differs to the equilibrium price, have to adjust the supply/demand until eq.

Question 14

Opportunity improvement

Answer 14

Can change the supply/demand

Question 15

Factors that shift the demand curve

Answer 15

1. Incomes
2. Tastes
3. Price of substitutes and complements
4. Expectations
5. Population

Question 16

What is a normal ood vs a inferior good?

Answer 16

Normal: quantity demanded at any price rises with income

Inferior goods: quantity demanded at any price falls with income

Question 17

What is a complement?

Answer 17

Increase in price of one good decreases the demand for antoher good
ex. bacon and eggs

Question 18

What are substitutes?

Answer 18

Increase in the price of one will increase the demand for another

Question 19

What does a left shift to the demnad curve mean?

Answer 19

Decrease in demand

Question 20

What does a rightward shift in a demand curve mean?

Answer 20

Increase in demand

Question 21

Increased demand?

Answer 21

Increase equilibirum price and quantity

Question 22

Decrease in demand?

Answer 22

Decrease in equilibirum price and quantity

Question 23

Increase in supply?

Answer 23

Decrease in equilibrium price and increase in eq quantity

Question 24

Decrease in supply?

Answer 24

Increase in equilibrium price and decrease in equilibrium quantity

Question 25

3 Conditions of perfect competition?

Answer 25

1. large number of consumers 2. Large number of producers 3. Producers sell identical or homogenous version of the product

Question 26

Equilibrium algebra for the supply schedule?

Answer 26

P=2+3Q^s

Question 27

Equilibrium prices and quantities for the demand schedule?

Answer 27

P=10-Q^d

Question 28

What happens to people who lack sufficient income topurchase bare necessicites?

Answer 28

The government intervenes, may implement price ceiling

Question 29

What is a price ceiling?

Answer 29

A legal maximum on the price at which a good can be sold

Question 30

What is a price support?

Answer 30

Keep prices above their equilibrium levels | Governments needs to become an active buyer