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1.c ME Class 2- 2024/2025 > chapter 4 > Flashcards

chapter 4 Flashcards

1
Q

How do markets work

A

Markets use the forces of supply and demand to set prices and allocate resources.

Example: In a competitive market for smartphones, prices adjust based on supply constraints and consumer demand.

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2
Q

What is price mechanism

A

Prices signal information and incentives to both buyers and sellers.

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3
Q

What is the role of supply and demand

A

Supply and demand determine market equilibrium.

Example: If demand for coffee increases, the price will rise, leading to a higher quantity of coffee supplied.

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4
Q

What is market equilibrium

A

The point where supply equals demand.

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5
Q

What is the law of demand

A

As prices fall, the quantity demanded rises.

Example: When the price of a new video game drops from $60 to $40, more consumers decide to buy it.

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6
Q

What is the demand schedule

A

A table showing the quantity demanded at different prices.

Example: An increase in consumer income can shift the demand curve for luxury cars to the right.

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7
Q

What are the factors affecting demand

A

Income changes, preferences, expectations, and prices of related goods.

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8
Q

what is the law of supply

A

As prices rise, the quantity supplied increases.

Example: If the price of wheat increases, farmers will grow more wheat.

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9
Q

What is the supply schedule

A

A table showing the quantity supplied at different prices.

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10
Q

What are the shifts in the supply curve

A

Non-price factors can shift the supply curve.

Example: A technological advancement in farming can shift the supply curve for crops to the right.

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11
Q

What are the factors affecting supply

A

Input prices, technology, expectations, and the number of suppliers.

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12
Q

What is equilibrium

A

Equilibrium is where quantity demanded equals quantity supplied.

Example: If the price of coffee is $5, and at this price, 100 cups are demanded and supplied, the market is in equilibrium.

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13
Q

Explain surplus and shortage

A

Surpluses occur when supply exceeds demand, and shortages occur when demand exceeds supply.

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14
Q

What is the impact of disequilibrium

A

Disequilibrium leads to changes in price until equilibrium is restored.

Example: If coffee is priced at $6, a surplus will develop, and the price will eventually fall back to equilibrium.

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15
Q

Explain price adjustments

A

Prices adjust to balance supply and demand.

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16
Q

explain movements along curves

A

Price changes cause movements along the demand and supply curves.

Example: A drop in coffee prices from $5 to $4 causes a movement along the demand curve, increasing the quantity demanded.

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17
Q

Change in Quantity vs. Change in Demand/Supply:

A

Price changes affect quantity demanded/supplied, while non-price changes shift the entire curve.

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18
Q

explain shifts of curves

A

Non-price factors shift the demand and supply curves.

Example: An increase in the price of coffee beans shifts the supply curve leftward, decreasing the quantity of coffee supplied.

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19
Q

explain demand vs supply shifts

A

Factors like consumer preferences and production costs cause shifts.

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20
Q

add more about the above

A
21
Q

what are external shocks

A

External events can affect supply and demand.

Example: A natural disaster reducing coffee bean supply causes a supply curve shift leftward, increasing prices.

22
Q

what are shocks

A

Unpredictable events that disrupt market equilibrium.

23
Q

Explain policy interventions

A

Government policies influence supply and demand outcomes.

Example: A subsidy for coffee production can increase supply and lower prices for consumers.

24
Q

What are some types of policies

A

Taxes, subsidies, price controls.

25
Q

provide histocial events that demonstrate market adjsutments

A

The oil price shocks of the 1970s showed how supply disruptions led to higher prices and economic adjustments.

26
Q

What are the modern market dynamics

A

Contemporary issues affect market outcomes.

Example: The rise of e-commerce has shifted supply and demand in the retail market.

Technological Advancements: Innovations that reshape markets and consumer behavior.

27
Q

market

A

a group of buyers and sellers of a particular good or service

28
Q

competitive market

A

a market in which there are many buyers and many sellers so that each has a negligible impact on the market price

29
Q

quantity demanded

A

the amount of a good that buyers are willing and able to purchase

30
Q

law of demand

A

the claim that, other things equal, the quantity demanded of a good falls when the price of the good rises

31
Q

demand schedule

A

a table that shows the relationship between the price of a good and the quantity demanded

32
Q

demand curve

A

a graph of the relationship between the price of a good and the quantity demanded

33
Q

normal good

A

a good for which, other things equal, an increase in income leads to an increase in demand

34
Q

inferior good

A

a food for which, other things equal, an increase in income leads to a decrease in demand

35
Q

substitutes

A

two goods for which an increase in the price of one leads to an increase in demand for the other

36
Q

Compliments

A

two goods for which an increase in the price of one leads to a decrease in the demand for the other

37
Q

Quantity supplied

A

the amoutn of a good that sellers are willing and able to sell

38
Q

law of supply

A

the claim that, other things equal, the quantity supplied of a good rises when the price of the good rises

39
Q

Supply schedule

A

a table that shows the relationship between the price of a good and the quantity supplied

40
Q

supply curve

A

a graph of the relationship between the price of a good and the quantity supplied

41
Q

Equilibrium

A

a situation in which the price has reached the level where quantity supplied equals quantity demanded

42
Q

equilibrium price

A

the price that balances quantity supplied and quantity demanded

43
Q

equilibrium quantity

A

the quantity supplied and the quantity demanded at the equilibrium price

44
Q

surplus

A

a situation in which quantity supplied is greater than quantity demanded

45
Q

shortage

A

a situation in which quantity demanded is greater than quantity supplied

46
Q

law of supply and demand

A

the claim that the price of any good adjusts to bring the quantity supplied and the quantity demanded for that good into balance

47
Q

add appendix

A
48
Q
A

1.c ME Class 2- 2024/2025 (10 decks)

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