Chapter 4 Flashcards
1
Q
What is the law of demand ?
A
With other things remaining the same, the higher the price of the good, the lower the quantity will be and the lower the price, the higher the quantity
2
Q
What are the determinants of demand ?
A
- Price
- Prices of related goods (complements and substitutes)
- income of households
- consumers taste/preference
- number of consumers
3
Q
What is the law of supply?
A
With other things remaining the same, the higher the price of the good, the greater the quantity supplied and vise versa
4
Q
What are the determinants of supply ?
A
- Prices of productive resources
- Prices of related goods
- Expected future Prices
- Number of suppliers
- Technology
- The state of nature
5
Q
What is consumer surplus ?
A
When consumers pay less and receive more value for their money’s worth
6
Q
What is producer surplus ?
A
When producers are willing to supply units of the product at less than the market price
