Chapter 4: Demand and Supply Flashcards
Determinants of Demand
- The price of the product
- The price of related products (complements and substitutes)
- The income of consumers
- Consumers taste/preference
- Household size
Determinants of Supply
- The price of products
- Price of alternatives
- The price of factors of production
- Excepted future prices
- State of technology
What does demand refer to
Demand refers to the quantities of a good or service that prospective buyers are willing and able to purchase during a certain period
What does supply refer to
Supply can be defined as the quantities of a good or service that producers plan to sell at each possible price during a certain period
What is market demand
Sum of the demand of all the persons in a market
Shows relationship between price and qd by all consumers
What is a movement along the demand curve
It is due to the changes in price of a good on the qd
What is a shift in the demand curve
It is due to other variables (determinants of demand)
What are the factors causing a shift in the demand curve
Substitute, complementary products and other determinants
What is market supply
The sum of all individual supplies.
Relationship between price and qs by all firms
What is a movement along the supply curve
Caused by a change in price, which will cause a change in quantity supplied
What is a shift in the supply curve
Caused by a change in any other determinants of supply either than price
