Ch.3 Supply + Demand Flashcards
Demand Schedule
How much of a good/service consumers WOULD buy at diff. prices
Quantity Demand
ACTUAL amount of good/service consumers willing to buy at a specific price
Perfect Competitive Market
No firm to control market + price
Inflation
Low supply High demand
Law of Demand
higher price of goods/service=smaller demand of that good/service
Relationship b/w price and quantity demand?
Inverse/negative. When P is high then QD is low. Vice versa
Why does demand change?
- Change in price of good
- Quantity of consumers
- Income
- Taste
- Expectations
Complements
Products that compliment each other
EX: coffee + sugar
chicken tenders + fries
Normal good
Income increases then demand for normal goods increases
Inferior good
Income increases then demand for inferior goods decreases
THINK: inferior means low rank/quality
EX: I make more money so i take bus less bc i brought car
Expectations
If price of a good is EXPECTED to increase in the near future, then demand of that good in present will increase
Shift to the right in Demand Curve
Represents increase
Shift to the left in Demand Curve
Represents decrease
Profit Maximization
Drives supply/production
Cost of Production
The investments in technologies that creat products
EX: if cost of production increases then price of input increases but our profit will decrease
Relationship b/w Price + Supply
Moves in the same direction
Price increases then Supply increases
Price decreases then Supply decreases
Formula for Proft
Profit=price of products - cost of production
Supply Schedule
shows how much of good/service would be supplied at diff. prices
Includes Quantity Supply
When supply curve moves upwards
Represents increase
When supply curves moved downwards
Represents decrease
Equilibrium Price
price matches quantity supplied+quantity demanded
Equilibrium quantity
quantity that was brought+sold
Surplus
Excess supply when price above equilibrium
Shortage
Excess demand when price is below equilibrium
