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ECON 208 > Chapter 3 - Demand, supply and price > Flashcards

Chapter 3 - Demand, supply and price Flashcards

1
Q

What is quantity demanded

A

Total amount that consumers desire to purchase at a certain price IN SOME TIME PERIOD

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2
Q

Quantity bought differs from quantity demanded because it refers to _______

A

actual purchases

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3
Q

flow variable + ex

A

so much per unit of time (ex. income, expenditure, etc.)

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4
Q

stock variable + ex

A

meaning in a point in time (ex. money in bank account, etc.)

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5
Q

Qt demanded flow or stock

A

flow

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6
Q

Hypothesis about qt demanded and why

A

Price and qt demanded are negatively related. Reduction of price means desire can be satisfied more cheaply by buying more of it

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7
Q

How price changes demand curve

A

Doesn’t change it -> only move on it

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8
Q

How variables other than price change demand curve (2 possibilities)

A

increase in demand (moves rightward)

decrease in demand (moves leftward)

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9
Q

4 things that can cause shift of demand curve

A

1) average household income
2) prices of other products
3) distribution of income or population
4) expectations about the future

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10
Q

Why average household income influences demand curve

A

normal good and inferior goods

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11
Q

normal good

A

qt demanded increases when income rises

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12
Q

inferior good

A

qt demanded decreases when income rises

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13
Q

Why distribution of income influences demand curve

A

changes for particular groups

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14
Q

Why prices of other products influence demand curve

A

Substitutes and complements

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15
Q

Substitutes def (in demand POV)

A

Good that can replace another one to satisfy a need

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16
Q

Complements def (in demand POV)

A

Goods that need to be consumed together

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17
Q

Why distribution of population influences demand curve

A

number of consumers

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18
Q

Why expectations about the future influence demand curve

A

push us to buy more or before a change

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19
Q

change in demand vs in qt demanded

A

in demand = curve shift

in qt demanded = mvmt along the curve or along a new curve

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20
Q

qt supplied def

A

amount of product firms desire to sell IN SOME TIME PERIOD

21
Q

qt supplied vs actually sold

A

supplied = firm desires to sell

actually sold = sold

22
Q

qt supplied flow or stock

A

flow

23
Q

Hypothesis about relationship between price and qt supplied and why

A

higher price = higher qt supplied –> want to maximize profits

24
Q

change in supply vs in qt supplied

A

in supply = curve shift

in qt supplied = along the curve or along a new curve

25
Q

change in price effect on supply curve

A

stays the same. mvmt along it or new one

26
Q

change in variable other than price on supply curve

A

shift of the supply curve

27
Q

which variable changes will shift supply curve (5 ex.)

A

1) price of inputs
2) technology
3) Gvt taxes and subsidies
4) Prices of other products
5) number of suppliers

28
Q

2 possibles shift of supply curve

A

Rightward -> increase

Leftward -> decrease

29
Q

why price of inputs influences supply curve

A

affects profits

30
Q

why technology influences supply curve

A

can produce more (because production is more efficient)

31
Q

why Gvt taxes and subsidies influences supply curve

A

affects profits

32
Q

why Prices of other products influences supply curve

A

substitutes and complements

33
Q

Substitutes def (in supply POV)

A

Products that can be produced with the same resources. (Producers will produce the product with highest price (ex. potatoes) so influences supply of carrots for ex.)

34
Q

Complements def (in supply POV)

A

Products that are produced together (Producers will produce more of one (ex. oil) if its price goes up so associated product (ex. gas produced along) will have higher supply

35
Q

why number of suppliers influences supply curve

A

entering suppliers : increase in supply

exiting suppliers : decrease in supply

36
Q

Market def.

A

Any situation where buyers and sellers negotiate transaction of outputs

37
Q

How markets may differ

A

In degree of competition among various buyers and sellers

38
Q

Perfectly competitive market def

A

Buyers and sellers are price takers. Price won’t change because of one person

39
Q

When can we apply demand-and-supply model to describe price determination

A

Three conditions :
1) Large number of consumers
2) Large number of producers
(each one small relative to size of market)
3) Producers sell homogeneous versions of the product

40
Q

what is equilibrium price (2)

A
  • price where every buyer finds seller and vice versa -> market clears
  • point that the market tends to reach if no regulation
41
Q

If we force exchange at price above equilibrium

A

excess supply -> market does not clear

42
Q

If we force exchange at price below equilibrium

A

excess demand -> market shortage (qt missing)

43
Q

Four laws of supply and demand briefly

A

What happens equilibrium price and qt in these 4 situations

  • fix supply. right or left shift of demand
  • fix demand. right or left shift of supply
44
Q

How to put demand and supply into graph (2)

A

1) equations

2) tables

45
Q

Absolute price of product def

A

Amount of money spent to get one unit

46
Q

Relative price of product def

A

Price of one good in terms of another

47
Q

absolute price vs relative price : which one doesn’t change with inflation

A

relative price

48
Q

demand and supply curves drawn in terms of relative prices or absolute prices ?

A

relative prices

49
Q

assumption when studying a relative price

A

prices of products other than the one we study are constant

ECON 208 (8 decks)

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