Demand and Supply Flashcards
What are markets?
o Where a group of buyers and sellers interact to purchase a good/service
What is demand?
o The quantity demanded (Qd) of a good is the amount that buyers are willing/able to purchase
What is the law of demand?
o The Law of Demand = as price rises, the quantity demanded of a good falls; conversely, as price falls, the quantity demanded rises
What is a choke price?
o The choke price is the lowest price where there is no demand for the good
What is the difference between market and individual demand?
o Market demand = sum of all individual demands for a particular good/ service
o Graphically, individual demand curves are summed horizontally to obtain the market demand curve
What are the factors that influence demand?
o Preferences
o Income Levels
o Price
o Substitute Goods (a product/service similar to the one demanded)
o Complementary Goods (a product/service adds value to the good demanded)
What generates a movement along the demand curve?
A change in the price of goods and services
How do changes in income impact the demand curve?
o When income increases, normal goods are more likely to be purchased
Consumption of ‘inferior goods’ is likely to decrease (e.g. homebrand)
o Different people have different considerations of what is a normal or an inferior good
In an exam scenario, draw both outcomes
If the price of a good increases, and the demand for a separate good also increases, those goods are _
Substitutes
If the price of a good increases, and the demand for a separate good decreases, those goods are _
Complements
How does the size of the market influence demand?
The more buyers in a market, the greater the demand
