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Econ 101 > chapter 2: supply and demand > Flashcards

chapter 2: supply and demand Flashcards

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1
Q 
jargon: 
y
p
q
qd
qs
d
s
A 
income
price
q= quantity traded 
qd=quantity traded
qs= quantity supplied 
demand
supply
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2
Q

does change in quantity demand mean a change in demand

A

no, the quantity demand could change from a price change, this is just a movement along the demand graph, the price change results in a quantity demand change, a change in demand is from something else; income change or population change m

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3
Q

market demand curve direction

A

slopes downward, inverse relationship, the higher the price the less people are willing and able to buy
income effect says its downward sloping m

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4
Q

increased price on the demand curve

A

mdecreases the amount of people willing and able to buy because they can’t afford to (income effect) or there may be a cheaper product to buy instead ( substitution effect)

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5
Q

income effect

A

mwhat consumers can afford, if price increases they may not be able to afford this product

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6
Q

how are price and quantity related for demand?

A

mthey are inversely related

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7
Q

what is demand

A

mthe quantities that consumers are willing and able to purchase at different prices

  • desire + ability
  • assumes other things held constant
  • range of prices
  • quantities over time
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8
Q

price lowered; effect on demand

A

mmore people will buy

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9
Q

real income

A

mamount of goods and services that it will buy, income increase results in real income increasing

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10
Q

market demand

A

mtotal demand for a product by all consumers

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11
Q

market supply curve direction

A

msupply means upward because the price and quantity supplied are directly related, if prices increase the producer will want to sell more

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12
Q

what happens to supply curve if price increases

A

mthe quanity supplied will increase because they have more money and they are willing and able to sell more
so it will increase

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13
Q

what happens to supply curve if prices decrease

A

mthe quantity supplied decreases because producers are less willing and able to produce as much at lower prices

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14
Q

what happens when price of goods changes to supply curve

A

mit will either move up or down it is not a change in supply

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15
Q

ksupply definition

A

mquantities that producers are willing and able to sell per period of time at various prices

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16
Q

market

A

mbrings buyers and sellers together assists them in negotiating prices

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17
Q

market equilibrium

A

mquality demanded is equal to quality supplied and it is an intersection on the graph. this means there’s no surplus or shortage of quantity

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18
Q

what happens to demand and supply curves on same graph when there is a decrease in price

A

m-the decrease in price allows more consumers to buy the product increasing the qd, however decreasing the price decreases the amount of qs suppliers are willing to produce so qs will decrease
if qd is greater than qs there will be a shortage, so then prices will start to rise, but not as many consumers can afford it so less buy as the graph reaches equilibrium again
low price=shortage=price increase

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19
Q

what happens to demand and supply curves on the same graph when there is in increase in price

A

mquantity supplied is greater than quantity demanded because people are less willing and able to buy product, there will be a surplus, too many produced therefore prices will lower to get rid of surplus

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20
Q

what is the equilibrium price

A

mthe price where qs is equal to qd

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21
Q

change in demand definition

A

mchange in quantities demanded at every price causing the whole demand curve to shift

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22
Q

substitution products

A

mdemand varies in relation to a change in price to a similar product; competitive products.

23
Q

inferior products

A

mdemand will decrease as a result in income increase — increase when income decreases (cheap shit)

24
Q

normal products

A

mdemand will increase if income increases vice versa

25
Q

complementary products

A

m purchased together demand related , increased price of one decrease demand of other

26
Q

2 ways income effects demand (products)

A

minferior, normal

27
Q

determinants of demand

A

m1. tast/preference
2. income: normal goods, inferior goods
3. price of related goods : substitutes , compliments
4. future expectations
5. population
6. income distribution
7. age distribution

28
Q

2 ways related products effect demand

A

msubstitution products, complementary products

29
Q

how does income effect demand

A

mnormal goods: Y increase- demand increases and when Y or income decreases the demand decreases (lobster, nice things)
inferior goods, Y increase- demand decreases and when Y decreases the demand increases (ramen noodles)

30
Q

how does price of related goods and services effect income

A

msubstitutes : price increase, increases demand for your product
price of substitute decreases, decrease in demand for your product
coke price increase- people bye pepsi, coke price decrease people by coke

complementary products: increase in price, decreases the demand in the other product, and a decrease in price increases demand for the other product
ex:tuition prices increase, not as many go to school therefore the demand for textbooks decrease

31
Q

what does decrease in demand cause

A

m*initial surplus, not as many people are willing and able to purchase at current price, the demand curve has shifted to the left, therefore the equilibrium price will be lower.

32
Q

what does decrease in demand mean for the demand curve

A

mthat the price will decrease and the quantity demanded will also decrease the curve shifts to the left because both of these values decrease

33
Q

how do future expectations influence demand

A

mprice
increase P tomorrow= increases D today
decrease in P tomorrow = decreases D today
income
increase Y tomorrow= increase in D today
decrease Y tomorrow= decrease D today

34
Q

how does population influence demand

A

mmore people= increase in D

35
Q

how does income distribution influence demand

A

mincrease poors income= increase in D for normal goods and decrease in D for inferior goods

36
Q

how does age distribution influence demand

A

mincrease age= increase D (canes, dentures)

decrease in age= increase D (vape pens, skate boards, baggy t-shirts, gothic makeup products)

37
Q

determinants of supply

A 
m-price of resources
-weather
-business tax
-business subsidie
-technology
-number of suppliers
expectations of the future 
-price of substitutes
38
Q

how does price of resources influence supply

A

mP increase in resources= decrease S
P decrease in resources = increase S

ex: price of gold increases, the amount of gold necklaces will be decreased

39
Q

how does weather influence supply

A

mpoor weather = decrease in supply (therefor later on a price increase)
good weather= increases supply

40
Q

how do business taxes influence supply

A

mincrease tax= decrease supply

decrease tax= increase supply

41
Q

how does technology influence supply

A

mif it decreases the price to produce the product it will increase the supply

42
Q

how does number of suppliers influence supply

A

mincrease of number of suppliers increases supply

decrease in number of suppliers decreases supply

43
Q

how do expectations of future prices influence supply

A

mincrease in P tomorrow decreases supply today

decrease in p tomorrow increases supply today

44
Q

how does price of substitutes of production influence supply (not the same as substitute products)

A

mthis means that companies would make other products instead of the ones they are making
P increase for product sold(output)= decrease S of other product
P decreases for product output = increase S of other product
ex if the p decreases for barley, a farmer will plant more rye to make more money

45
Q

how to find equilibrium algebraically

A 
mthis is when Qs=QD
so solve equation for QS and QD and solve for P 
1. solve demand function for QD
2. solve supply function for QS
3.set QS=QD and solve for P 
4. sub p into one question to find Q
46
Q

how to find change in demand algebraically

A

m1. solve for equations qd and qs

2. add or subtract the change in quantity to find the new qd or qs then set equations to qs= qd and solve for p

47
Q

if quantity demanded is 40

and quantity supplied is 60 what is the quantity traded at a certain price

A

mthe quantity traded will be 40
there will be a 20 surplus, even though these products are produced doesn’t mean people will buy them if they are not willing or able to

48
Q

what is the quantity traded of the quantity demanded is 200 and the quantity supplied is 100 at a certain price

A

mthe quantity traded will be 100 because there’s only 100 products supplied and the extra 100 can’t be pulled out of thin air. this will result in a shortage which will drive the price up, the shortage will be of 100

49
Q

increase in demand- demand curve

A

mshifts to the right, people are wanting more for each price

*equilibrium increases

50
Q

decrease in demand - demand curve

A

mshifts to the left, for the same amounts of money people are buying less
equilibrium decreases

51
Q

increase in supply-supply curve

A

mshifts to the right, more is supplied at the previous points this decreases the price because a surplus will be created

52
Q

decrease in supply-supply curve

A

mshifts to the right, less supply can result in a shortage, so price will increase-equilibrium

53
Q

what depends on price

A

mqd and qs depend on price
-people won’t buy if too much, therefore price determines qd
-sellers won’t sell if the price is too low therefor price determines qs
this is why you have to write functions as qs= a+bp
and qd= a+bp

Econ 101 (11 decks)

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