Chapter 3: demand and supply basics Flashcards
Comparative static analysis
Compares and initial equilibrium with a new equilibrium
Difference due to change of one of the things that lie behind demand or supply curve
Equilibrium price
Equilibriates the markert
clears the market
Price at which quantity demanded equals quantity supplied
Excess demand
Quantity supplied excedes quantity demanded at given price
Excerts upward pressure on price
Excess supply
Quantity supplied exceeds quantity demanded at given price
Excerts downward pressure on price
What happens at non-equilibrium
Short side dominates
What is traded is what suppliers are willing to sell
Lesser of the quantity of demand or supply that is traded
Happens a lot with price ceilings and price floors
Supply schedules
Based on. Primarily cost of production of product in question
Demand curve
Graphical expression of relationship of price and quantity demanded
We assume all exterior variables remain constant
Supply curve
Graphical representation between relationship of price and quantity supplied
We assume all other things are constant
Substitute goods
when a price reduction for a related product reduces the demand for a primary product, it is a substitute for the primary product
when a price rises for a related product increases the demand for a primary product, it is a substitute for the primary product
Complementary goods
when a price reduction for a related product increases the demand for a primary product, it is a complement for the primary product
when a price rises for a related product increases reduces the demand for a primary product, it is a complement for the primary product
Inferior good
Demand decreases due to rising income
Mans want to buy gyuer shit
Normal goods
Demand increases when income rises
The gyuer shit
Distribution of income
Important determinant of the demand of commodities and services
Is taste constant
Not in evolving world buoooy
Price floor
Sets bar above market-clearing price
Quota
Right to supply a specific quantity of a good to the market
physical restriction on output
Price ceiling
Sets bar under market sealing price
Whats the main similarity between price floor and price ceiling
The quantity actually traded at certain price is less than the supply and demand quantity at the same price
The goal of a marketing board
To ensure that price floors and quotas can be maintained
Market demand
Horizontal sum of individual demands
market
set of arrangements by which buyers and sellers interact in order to exchange goods and services
demand
quantity buyers wish tu purchase at every conceivable price
supply
quantity suppliers willing to supply at every conceivable price
quantity demanded
the exact quantity demanded at a given price
quantity supplied
the exact quantity supplied at a given price
what might shift demand curve or cause change in demand relationship?
prices of related goods
consumer incomes
tastes and networks
expectations
tastes and fashion
when goods or services become popular, the demand expands
price expectations
if prices expected to rise in the future, demand expands today
change in prices of related goods, incomes, preferences or price expectations will shift the demand cure or cause a move along the demand curve
shift in demand curve
change in price results in what?
move along demand curve
improvement of technology causes what?
expands the supply
effect of input costs
rise in costs contracts supply
decrease in costs expands supply
price controls
government rules or laws that inhibit the adjustment of price to clear markets
law of unintended consequences
policy measures frequently produce impacts thet are unintended, and that uses impacts may undermine the primary goals of the regulation
market demand curve sum
horizontal sum of individual consumers demand curves
