Chapter 4 Flashcards
A law stating that the higher the price buyers are willing to pay, other things being held constant, the greater the quantity of the product a supplier will produce and vice versa
Law of supply
Tabular model noting the quantities of an item that suppliers are willing to produce at various prices
Supply schedule
A graph illustrating the quantities of an item that suppliers are willing to produce at various prices
Supply curve
A situation in which the change in the price of an item causes a change in the number supplied
Change in quantity supplied
The shifting of a supply curve that occurs when suppliers are willing to produce more or less of an item regardless of price
Change in supply
A leftward shift of the supply curve indicating a decrease in the quantity suppliers are willing to produce at any price
Decrease in supply
A rightward shift in the supply curve indicating a willingness of business firms to produce more of an item at any given price
Increase in supply
The point at which the demand curve and the supply curve for an item intersect
Market equilibrium point
The price corresponding to the intersection of an item’s supply and demand curves; the price at which consumers are willing to buy the same quantity that suppliers are willing to produce
Market equilibrium price
An excess of unsold products resulting from a price above the market equilibrium price
Surplus
A barrier preventing the price of an item from falling lower than a certain price
Price floor
An insufficient supply of an item as a result of a price below the market equilibrium price
Shortage
A barrier preventing the price of an item from rising above a certain price
Price ceilings
The amount of goods and services business firms are willing and able to provide at different prices
Supply
State the law of supply ?
The higher the price the buyers are willing to pay , the greater the quantity the supplier is willing to produce
Which way does a supply curve slope and why?
Slopes upward to the right indicating the greater the price buyer is willing to pay the greater the quantity firms will supply
What three factors can lead to a change in supply
Change in technology
Changes in production costs
Changes in prices of related goods
At what point do supply and demand intersect ?
At the market equilibrium point
What occurs when the price of a product is higher than the price at which supply equals demand
A surplus
What is the simplest solution to a surplus
When the producer lowers the price until the quantity demanded equals the quantity he has to supply
What causes a shortage, and what are the solutions ?
A shortage is caused when it’s product price is lower than the market equilibrium price.
Possible solutions:
- discouraging demand for the product
- increasing supply of the product
- allowing to price to rise to the equilibrium level
