APPECO LESSON 3 Flashcards
It helps us solve the problem on excess supply and excess demand, and lead
it to a balanced supply and demand. In our needs, we do not want oversupply.
It means wastage of income. For entrepreneurs, it is not efficient if their stocks
or supplies are greater than the actual demand. It is a loss not revenue.
Economics
____ or the amount of good or service consumers are willing to purchase
at each price. If customers cannot pay for it, there is no effective demand.
Demand
Demand
is what a buyer pays for a unit of the specific good or service.
The total number of units purchased at that price is called the quantity
demanded
Price
Explains the interaction between the sellers of a product & the buyers. It shows
the relationship between the availability of a particular product & the desire (or
demand) for that product has on its price.
Law of Supply & Demand
If all other factors remain equal, the higher the price
of a good, the fewer people will demand that good.
I. The Law of Demand
“The higher the price, the lower the quantity
demanded” and vice versa.
I. The Law of Demand
The amount of a good that buyers purchase at a
higher price is fewer because as the price of good
goes up, the opportunity cost of buying the good also
is less. Consumers will avoid buying a product.
I. The Law of Demand
For example, if the price of video game drops, the
demand for games may increase as more people
want the games.
I. The Law of Demand
Factors Affecting Demand (4)
o Income of Buyers
o Number of Potential Buyers
o Preferences
o Complementary Products
The demand curve is always ____ sloping due to the law of diminishing
marginal utility.
downward
____ demonstrates the quantities
that will be sold at a given Price.
The law of supply
“The higher the price, the higher, the quantity
supplied” and vice versa
The law of supply
Producers supply more at a higher price
because selling at higher quantity at a higher
price increases revenue
The law of supply
For example, if the price of video games
increases, sellers are likely to supply more
games to maximize their profits.
The law of supply
Factors Affecting Supply:
(6)
o Production Capacity
o Production Costs such as Labor & Materials
o The Number of Competitors
o Ancillary Factors such as Material Availability
o Weather
o Reliability of Supply Chains
____ says, “as the price of a product increases, companies will
produce more of the product.”
The law of supply
When graphics the supply vs. the price, the slope ____.
rises
____ or market-clearing price is the price at which the producer can
sell all the units he wants to produce and the buyer can buy all the units he
wants.
Equilibrium price
Supply and demand are balanced, or in ____.
equilibrium
In the ____ ____, the two slopes will intersect. The market price is
sufficient to induce suppliers to bring to market that some quantity of goods
that consumers will be will to pay for at that price.
equilibrium point
A ____ curve shows the relationship between quantity demanded and price
in a given market on a graph.
demand
The ____ ____ ____ states that a higher price typically leads to a lower quantity
demanded.
law of demand
A ____ curve shows the relationship between quantity supplied and price on
a graph.
supply
The____ says that a higher price typically leads to a higher quantity
supplied.
law of supply
The equilibrium price and equilibrium quantity occur where the supply and
demand curves ____.
cross
The ____ occurs where the quantity demanded is equal to the quantity
supplied.
equilibrium
If the price is ____ the equilibrium level, then the quantity demanded will
exceed the quantity supplied.
below
Excess demand or a ____ will exist. If the price is above the equilibrium
level, then the quantity supplied will exceed the quantity demanded.
shortage
