Demand and supply

Question 1

1) What is a competive market
2) and a perfectly competitive market

Answer 1

1) buyers and sellers both have negligible effect on price
2) All goods are exactly the same + buyers and sellers are so numerous that no individual can affect market price (each are price takers)

Question 2

What are the demand curve shifters?

Answer 2

1) number of buyers
2) Income
- normal goods
- inferior goods
3) Prices of related goods
- Substitutes
- Complementary goods
4) Tastes (preferences)
5) Expectations
6) Price (causes a movement along the d-curve)

Question 3

What is a normal good and a inferior good?

Answer 3

demand for a normal good is positively related with income

demand for inferior good is negatively related to income

Question 4

What are the supply curve shifters?

Answer 4

1) Input prices (wages, raw materials)
2) Technology (improvement)
3) Number of sellers
4) Expectations
5) Price (causes a movement along the s-curve)

Question 5

What is it called when demand equals supply, when supply is above demand and when demand is above supply?

Answer 5

1) Equilibrium quantity
2) Suplus (excess suply)
3) shortage (excess demand)

Question 6

What are the terms for shifts vs. movements along the curve?

Answer 6

• Change in supply: a shift in the s curve (technology, costs etc.)
• Change in the quantity supplied: a movement along a fixed s curve (when price changes)
• Change in demand: shift in the d curve
• change in the quantity demanded: movement along the d curve