Chapter 4 - The market forces of Supply and Demand Flashcards
What is Supply and Demand?
Refers to the behaviour of people as they interact with one another in competitive markets.
Determines the quantity of each good produced and the price at which it is sold.
What is a Market?
A group of buyers and sellers of particular goods or services.
- Buyers as a group determine the demand for the product
- Sellers as a group determine the supply of the product.
What is a competitive market?
A market in which there are many buyers and sellers so that each has a negligible impact on the market price.
What is Quantity Demanded and what is Law of Demand?
Quantity Demanded - the amount of a good that buyers are willing and able to purchase.
Law of Demand - the claim that, other things equal, the quantity demanded of a good falls when the price of the good rises.
What is demand Schedule and what is Demand Curve?
Demand Schedule - table that shows the relationship between the price of a good and the quantity demanded.
Demand Curve - a graph of the relationship between the price of a good and the quantity demanded.
What is Market Demand?
The sum of all the individual demands for a particular good or service.
Shifts in the demand curve?
Any change that increase the quantity demanded at every price shifts the demand curve to the RIGHT and is called an INCREASE in demand.
Any Change that reduces the quantity demanded at every price shifts the demand curve to the LEFT and is called a DECREASE in demand.
What is Normal Good and what is Inferior Good?
Normal Good - a good for which, other things equal, an increase in income leads to an increase in demand.
EX: clothing, household appliance.
Inferior Good - a good for which, other things equal, an increase in income leads to a decrease in demand.
EX: Grocery products, instant noodles, frozen foods.
The DIFFERENCE : Branded clothing VS. Coarse Cloth.
What is Substitutes and Complements?
Substitutes - two goods for which an increase in the price of one leads to an increase in the demand for the other.
Complements - Two goods for which an increase in the price of one leads to a decrease in the demand for the other.
What are all the factors that shift the demand curve?
Income, prices of related goods, tastes, expectations, number of buyers.
What is Quantity Supplied and Law of Supply?
Quantity supplied - the amount of a good that sellers are willing and able to sell at.
Law of Supply - the claim that, other things equal, the quantity supplied of a good rises when the price of good rises.
What is Supply Schedule, Supply Curve, and Market Supply?
Supply Schedule - a table that shows the relationship between the price of a good and the quantity supplied.
Supply Curve - a graph of the relationship between the price of a good and the quantity supplied.
Market Supply - The sum of supplies of all sellers.
Shifts in the Supply Curve?
Any change that increase the quantity supplied at every price shifts the supply curve to the right and is called an increase in supply.
Any change that reduces the quantity supplied at every price shifts the supply curve to the left and is called a decrease in supply.
What are all the factors that shift the Supply Curve?
Input prices, Technology, expectations, number of sellers.
What is Equilibrium?
A situation in which the price has reach the level where quantity supplied equals quantity demanded.
