Basics of Demand and Supply Flashcards
What is market equilibrium?
When the quantity supplied and the quantity demanded are equal.
What is a market?
A market is a place where consumers/buyers and suppliers/sellers come together to exchange goods and services for money.
What do we mean by a change in quantity demanded versus a change in demand?
Quantity demanded refers to a movement along the demand curve whereas a change in demand refers to a shift in the entire demand curve.
What factors cause a shift in the demand curve?
All factors apart from price.
This includes:
- changes in income
- changes in advertising expenditure
- changes in tastes and fashion/trends
- changes in the price of substitute goods and services
- changes in the price of complementary goods and services
What factors cause a movement in the demand curve?
Only price - ceteris paribus.
What causes a surplus?
A surplus is where quantity supplied is greater than the quantity demanded (overstock)
What is ceteris paribus?
All other things held constant (apart fro price and quantity)
What is the law of quantity demanded?
As price increases quantity demanded decreases and vice versa, ceteris paribus.
What do we mean by a change in supply demanded versus a change in demand?
A change in demand is a change in how much of the product there is, whereas a change in supply demanded will cause equilibrium price to change in opposite directions.
What factors cause a shift in the supply curve?
Costs of Production
Productivity
What factors cause a movement in the supply curve?
A movement in a supply curve is a change in quantity supplied as a result of a change in price
What happens when the quantity demanded is less than the quantity supplied?
Surplus (overstock)
Which group in society does the demand curve refer to?
Buyers
Which group in society does the supply curve refer to?
Sellers
What happens when the quantity demanded is greater than the quantity supplied?
A shortage of that product.
