Demand And Supply Flashcards
1
Q
What are determinants for changes in demand
A
Price of complements and substitutes Incomes Population Consumer taste Government legislation Advertisement effectiveness
2
Q
What are determinants for changes in supply
A
Costs Productivity Technology Taxes and subsidies Expectations Weather World affairs Government policy
3
Q
Why is the demand curve downward sloping
A
Effect of marginal utility
As we consume a higher quantity we are willing to pay less
4
Q
Why is the supply curve upward sloping
A
As price increases firms have an incentive to supply more
As output rises firms usually have higher MC in the short run so it is more costly to increase output –> price increases so there is no loss
