Chapter 3: Supply and Demand - What Causes a Supply Curve to Shift

Question 1

What causes a supply curve to shift? (6)

Answer 1

1. Changes in input prices
2. Changes in the prices of related goods and services
3. Changes in weather
4. Changes in technology
5. Changes in expectations
6. Changes in the number of producers

Question 2

What is an input?

Answer 2

• a good that is used to produce another good
  ex. how much it costs to produce the good determines what price

Question 3

What is the market supply curve?

Answer 3

• horizontal sum of the individual supply curves of all firms in that market

Question 4

What is equilibrium in a competitive market?

Answer 4

• When the quantity demanded of a good equals the quantity supplied of that good
• the price at which this takes places is the equilibrium price (market clearing price)
• every buyer finds a seller and vice versa

Question 5

What is a surplus? (2)

Answer 5

• quantity supplied exceeds quantity demanded
• occurs when price is above equilibrium level

Question 6

What is a shortage?

Answer 6

• Quantity demanded exceeds quantity supplied
• price is below equilibrium level

Question 7

Why does it become difficult when you have a shift in both the supply and demand curve with no numbers?

Answer 7

• we do not know the change in shift (see pg 43)
• if a q on the test says this, it depends on the relative size of the shift

Question 8

Simultaneous shift of both curves chart

Answer 8

Question 9

When does equilibrium occur?

Answer 9

• when price and quantity are the same for both supply and demand