basic demand and supply Flashcards
what is a market demand function ?
a function that tells us the quantity all consumers are willing to buy.
Qd is a function of, Q,P,Pother,Income, and many other things
what is the difference between direct and derived demand ?
direct - regular demand for original goods
derived - demand comes from the demand for things that the good helps to produce (e.g steel for cars)
define the market equilibrium
the price where Qd = Qs and there is no tendency to change ( as long as the exogenous variables remain stable ).
list the characteristics of a competitive market
- many small buyers and sellers
- price takers
- no barriers
- mobile factors of production
- perfect information
what is the market demand curve ?
the curve that plots the aggregate quantity consumers ar willing to buy at different prices. ( holding all things outside the graph constant.)
Qd = Q(p)
what is the law of demand ?
Qd rises -> price rises
what causes the market demand curve to shift ?
movements along the curve can only be caused by changes in price. almost everything else causes a shift
a change the increases the consumers willingness to demand - shifts the curve right
a change the decreases the consumers willingness to demand - shifts the curve left
what is the market supply function ?
a function that tells us the quantity of a good supplied by all the producers.
it is dependent on a number of factors
price, other prices, wage rate, and more
a supply curve is the function plotted into a curve
what is the law of supply ?
price rise - quantity supplied rises
how do you solve to find equilibrium price and equillibrium quantity ?
Qd = Qs and find P*
then sub in P* to find Q*
define excess demand/supply ?
when the Q is bigger for one than the other is willing to at a price
