Chapter 3 and 4 Flashcards
Law of Demand
Price Rises = Quantity Demand Falls
Prices Falls = Quantity Demand Rises
Substitute
Goods consumed in place of each other
Good price rises = Substitute Good demand rises
Good price falls = Substitute Good demand falls
Complements
Price good rises = Complement demand good falls
Price good falls = Complement demand good rises
Normal Good
If an increase (decrease) in buyers’ incomes causes an increase (decrease) in demand
for that good
Inferior Good
If an increase (or decrease)
in income leads to a decrease (or increase) in demand
Law of Supply
Price rises = Quantity supply falls
Price falls = Quantity supply rises
Determinants of Demand
- Substitutes/Complements
- Normal and Inferior Goods
- Number of Buyers (population)
- Buyers’ Tastes
- Buyers’ Expectations
Determinants of Supply
- Price of input
- # of suppliers
- Expectation
- Technology
- Regulation
- Taxes and Subsidies
- Weather
Equilibrium Price
Quantity Demmanded = Quantity Supplied
Market equilibrium
Market supply and Market Demand intersect
Shortage
Quantity demmanded > Quantity supplied
Shortage
Quantity demmanded > Quantity supplied
Surplus
Quantity supplied > Quantity demmanded
Increase in demand shifts the demand curve?
Right
Decrease in demand shifts the demand curve?
Left
Increase in supply shifts the supply curve?
Right
Decrease in supply shifts the supply curve?
Left
If the decrease in demand is greater than the increase
in supply, the equilibrium quantity will?
Decrease
If the increase in supply is greater than the decrease in demand, the equilibrium quantity will?
Increase
Price ceiling
Legally established maximum price
Price floor
Legally established minimum price
