Demand And Supply - Micro Flashcards
What is demand?
How willing and able consumers are to buy a good/ service at a given price level in a given period of time
What does the law of demand state?
For a normal good there is an inverse relationship between price and quantity sold, ceteris paribus
What are the 12 factors of demand?
- Price
- Level of disposable income
- Quality
- Population
- Advertising
- Branding
- Fashion/ trends
- Price of substitutes
- Price of complements
- Seasons
- Speculative demand
- Customer service
What do people generally do when faced with a higher opportunity cost?
Buy less (demand goes down)
What are the two axis on a demand curve?
Price
Quantity demanded
What is supply?
How willing and able firms are to produce a good or service at a given price level in a given period of time
What dos the law of supply state?
There is a positive relationship between price and quantity sold (as the price of something increases, firms produce more)
What is the profit motive?
When firms have more incentive to produce something because at a higher price, firms are being rewarded more for their product
What are the 8 factors that affect supply?
- Price
- Cost of production
- Quantity of economic resources (factors of production)
- Factor productivity
- Level of technology
- Number of firms in the market
- Indirect taxes on the good/ service
- Subsidies on a product
What are the axis on a supply curve?
Price
Quantity demanded
What is effective demand?
Demand supported by the necessary purchasing power (ability to purchase)
What is market demand?
Combination of all individual demand
How is market demand calculated?
Adding up the individual demand at each price level
What is composite demand?
When goods have more than one use
