Demand and Supply Basics Flashcards
If you demand something, then you
- Want it.
- Can afford it.
- Plan to buy it.
The quantity demanded of a good or service
the amount that consumers plan to buy during a given time period at a particular price
A relative price
an opportunity cost
the price of an object is
the number of dollars that must be given up in exchange for it. (money price)
The opportunity cost of an action is
the highest- valued alternative forgone.
Value of consumption
1- Consumers receive benefits from purchasing consumption goods.
2- Value of consumption is the maximum amount that a consumer is willing to pay.
3- If a consumer receives more value from some good (or service) than the price paid, then the consumer will get consumer surplus.
Consumer surplus
If a consumer receives more value from some good (or service) than the price paid
The law of demand states
that a higher price leads to a lower quantity demanded and that a lower price leads to a higher quantity demanded.
Value of Production
1- Producers receive benefits (the price) from selling their production.
2-The value of production is the minimum amount the producer is willing to accept.
3- If a producer receives a higher price for some good (or service) than the cost of production, then the producer will get producer surplus.
Producer surplus
If a producer receives a higher price for some good (or service) than the cost of production
If a firm supplies a good or service, the firm
- Has the resources and technology to produce it.
- Can profit from producing it.
- Plans to produce it and sell it.
The law of supply states that
as the price of a good increases, the quantity supplied increases.
Quantity demanded
is the amount of good or service that consumers wish to purchase during some time period at a given price.
Demand
is the entire set of price and quantity demanded data.
The demand curve
is what is drawn using the data of price and quantity demanded
