Demand and Supply Flashcards
What is Demand?
The quantity of a good/service consumers are willing and able to buy at a given price in a given time period.
What is the law of demand?
There is an inverse relationship between price and quantity demanded. As the price increases, quantity demanded decreases. As the price decreases, quantity demanded increases.
What is a contraction and extension of demand on a demand curve?
A contraction of demand is when the price increases on a demand curve. An extension of demand is when the price decreases on a demand curve.
What are some Non-price factors that can affect demand?
PASIFIC:
Population
Advertising
Substitute’s Price
Income
Fashion/Tastes
Interest rates
Complement’s Price
What is a Substitute?
A good that can replace another good, such as two different brands. For example, Pepsi and Coke.
What is a Complement?
A complement is a good that goes with another good. For example, strawberries and cream.
What is Supply?
The quantity of a good/service producers are willing and able to produce at a given price in a given time period.
What is the Law of Supply?
There is a direct relationship between price and quantity supplied. As price increases, quantity supplied increases. As price decreases, quantity supplied decreases.
What is a contraction and extension of supply on a supply curve?
An extension of supply is when the price increases on a supply curve. A contraction of supply is when the price decreases on a supply curve.
What happens if the Costs of Production increases on a supply curve?
Supply shifts left
What happens if the Costs of Production decreases on a supply curve?
Supply shifts right
What are some Non-price factors that can shift supply?
PINTSWC
Productivity
Indirect Tac
No. of firms
Technology
Subsidy
Weather
Costs of Production - Transport, Labour, Oils, Raw materials, Regulations, Utilities
What is a Subsidy?
A money grant given by the government to producers to lower costs of production and to encourage an increase in output.
