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Applied Economics > Demand and Supply Part 2 > Flashcards

Demand and Supply Part 2 Flashcards

1
Q

The _________ is a relation showing the quantities of a good that consumers are willing and able to buy per period at various prices, other things held constant (ceteris paribus).

A

demand

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2
Q

It is the demand of an individual consumer.

A

Individual demand

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3
Q

The ____________ is the sum of the individual demands of all consumers in the market.

A

market demand

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4
Q

METHODS OF DEMAND ANALYSIS

A

demand schedule
demand curve

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5
Q

The ________ mentioned in this lesson pertains to the entire ____________ or ________.

A

demand
demand schedule
demand curve

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6
Q

A __________ is a table showing the relationship between prices and the specific quantities demanded at each.

A

demand schedule

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7
Q

the provided information by a this can be used in graphical form to construct a demand curve showing the price-quantity demanded relationship.

A

demand schedule

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8
Q

A ___________is a curve or line showing the quantities of a particular good demanded at various prices during a given period, other things constant.

A

demand curve

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9
Q

The ______________ is the sum of the individual demand curves for all consumers in the market.

A

market demand curve

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10
Q

The _________has a negative slope – left to right, downward slope indicating the inverse relationship between quantity demanded and price

A

demand curve

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11
Q

The ___________is the amount demanded at a particular price. It is the specific amount of the good on the demand schedule or demand curve.

A

quantity demanded

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12
Q

The Law of Demand states that the quantity of demanded products per period relates inversely to their price, other things constant (ceteris paribus)

A

Law of Demand

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13
Q

What is the Law of Demand?

A
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14
Q

Since consumers are inclined to maximize satisfaction, the Law of Demand states that if the prices go _____, the quantity demanded of a product will go_____, and if the prices go ______, the quantity demanded of a product will go _______

A

up
down
down
up

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15
Q

Example of substitution effect

A

For example, when the prices of bananas rise, people buy oranges instead.

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16
Q

The _________________is felt when a product’s price changes demand due to people buying and consuming other substitute goods.

A

substitution effect

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17
Q

It is the amount of satisfaction a consumer receives from the consumption of a product or service.

A

Economic utility

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17
Q

The ______________is felt when a product’s price changes a consumer’s real income or purchasing power (the capacity to buy within a given income).

A

income effect

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18
Q

It is the change in total economic utility (or simply utility) resulting from a one-unit change (meaning buying more than one) when you consume a product or service.

A

Marginal utility

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18
Q

Example of income effect

A

For instance, if there is an increase in tuition fees, parents will either not enroll their children or transfer to another school with a lesser tuition fee.

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19
Q

The ___________________ states that the more of the product or service an individual consumes per period, other things constant (ceteris paribus), the smaller the marginal utility of each additional unit consumed.

A

Law of Diminishing Marginal Utility

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20
Q

Examples of applications of Diminishing Marginal Utility

A

Restaurants that have all-you-can-eat specials

Having a second copy of today’s newspaper

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21
Q

Due to______________the willingness to buy another piece of whatever product you decided to buy lessens (diminishes) than your first purchase.

A

diminishing marginal utility

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22
Q
  1. With the use of the __________ the demand can be analyzed mathematically.
A

demand function

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23
Q

QD = a – bP meas

A

Whereas:
QD: Quantity demanded at a price
a = Intercept of the demand curve
b = Slope of the demand curve
P = Price of the good at a period

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23
Q

The __________shows the relationship between the demand for a commodity and the factors

A

demand function

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24
Q

It is expressed as a mathematical function

A

demand function

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24
Q

TRUE or FALSE

There is no inverse relationship between quantity demanded and price – a price increase will cause a decrease in the quantity demanded, and vice versa.

A

False

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25
Q

Law of Demand Formula

A

QD = a – bP

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26
Q

ILLUSTRATION

The current price of Product A is Php 7. The intercept of the demand curve is 4. The slope is 0.25. Compute how much of Product A will be demanded by Consumer Z.

A

QD = a – bP
QD = 4 – 0.25 (7)
QD = 4 – 1.75
QD = 2.25 units of Product A

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27
Q

ILLUSTRATION

The current price of Product A is Php 7. The intercept of the demand curve is 4. The slope is 0.25. Compute how much of Product A will be demanded by Consumer Z.

What if the price increases by Php 2?

A

QD = a – bP
QD = 4 – 0.25 (9)
QD = 4 – 2.25
QD = 1.75 units of Product A

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28
Q

ILLUSTRATION

The current price of Product A is Php 7. The intercept of the demand curve is 4. The slope is 0.25. Compute how much of Product A will be demanded by Consumer Z.

What if the price decreases by Php 2?

A

QD = a – bP
QD = 4 – 0.25 (5)
QD = 4 – 1.25
QD = 2.75 units of Product A

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29
Q

TRUE or FALSE

There is an inverse relationship between quantity demanded and price – a price increase will cause a increase in the quantity demanded, and vice versa.

A

FALSE

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30
Q

TRUE or FALSE

There is an inverse relationship between quantity demanded and price – a price increase will cause a decrease in the quantity demanded, and vice versa.

A

True

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31
Q

NON-PRICE DETERMINANTS OF DEMAND

A

Taste or Preference

Changing Incomes

Population Change

Occasional or Seasonal Products

Substitute and Complementary Goods

Expectations of Future Prices

32
Q

It is consumers’ personal likes or dislikes for certain goods and services.

A

Taste or preference

32
Q

There is a _______________by consumers when they believe that having such a product is trendy.

A

brand preference

33
Q

An increase in one’s income increases an individual’s capacity or power to demand products or services that they cannot buy due to having a lower income.

A

Changing Incomes

34
Q

An increase in the demand for some goods or services, particularly for basic goods, results from an increasing population. There is a decline in demand due to a decrease in population.

A

Population Change

35
Q

Various events and seasons within the year may cause a movement on the demand curve for specific goods.

Examples: Queso de bola during Christmas, flowers and chocolates during Valentine’s Day. After such events, the demands for such products revert to the original level.

A

Occasional or Seasonal Products

36
Q

complement each other, and one good cannot exist with the other good.

Example: your car cannot function without gasoline/petrol.

A

Complementary Goods

37
Q

goods are interchanged with another good, usually offered at a lower price, thus making them more attractive to customers.

Example: Lena wants to buy Adidas Nizza Trefoil shoes priced at Php 2,310. With the price and her budget of only P2,000, she bought a cheaper pair of shoes, Reebok Runner 4.0, priced at Php 1,836.49. Adidas and Reebok are substitutes.

A

Substitute Goods

38
Q

If customers expect the price of a product or service to increase (or decrease) in the future, it may lead to an increase (or decrease) in current demand. Future expectations may alter the demand for a specific good.

A

Expectations of Future Prices

39
Q

METHODS IN SUPPLY ANALYSIS

A

supply schedule
supply curve
supply function

40
Q

a table listing the various prices of a product and the specific quantities supplied at each of these prices at a given time.

A

supply schedule

41
Q

Generally, the provided information by a supply schedule can be used in graphical form to construct a supply curve showing the price-quantity supplied relationship.

A

supply schedule

42
Q

A ___________ is a curve or line showing the quantities of a particular good supplied at various prices during a given period and other things held constant.

A

supply curve

42
Q

The _______shows the total quantities of all producers at various prices.

A

market supply curve

43
Q

It is simply the horizontal sum of the individual supply curves for all the producers in the market.

A

market supply curve

44
Q

The ___________ is the amount offered for sale at a specific price, as shown by the point on the given supply curve.

A

quantity supplied

44
Q

The ___________states that the quantity of product supplied during a period is usually directly related to its price, other things constant (ceteris paribus).

A

Law of Supply

45
Q

If the price of a product or service increases, the quantity supplied for such a product or service _______, and vice versa.

A

increases

46
Q

The _______-indicates that a higher price, which is an incentive for businesses or producers, encourages them to produce more goods or services for profit maximization.

A

Law of Supply

47
Q

A supply function is a mathematical notation that links the dependent variable, quantity supplied (QS), with various independent variables that determine quantity supplied. These independent variables are the price of the product, the price of factor inputs, the number of sellers in the market, importations, weather conditions, technology, policies of the governments, and business goals.

A

supply function

47
Q

Formula of Supply

A

QS = c + dP

48
Q

QS = c + dP stands for

A

Whereas:
QS: Quantity supplied at a price
c = intercept of the supply curve
d = slope of the supply curve
P = price of good sold at a period

49
Q

The current price of Product A is Php 15. The intercept of the supply curve is 5. The slope is 0.25. Compute how much of Product A will be supplied by the sellers.

What if the price increases by Php 4?

What if the price decreases by Php 4?

A

QS = c + dP
QS = 5 + 0.25 (15)
QS = 5 + 3.75
QS = 8.75 units of Product A

QS = c + dP
QS = 5 + 0.25 (19)
QS = 5 + 4.75
QS = 9.75 units of Product A

QS = c + dP
QS = 5 + 0.25 (11)
QS = 5 + 2.75
QS = 7.75 units of Product A

50
Q

If there is movement from one point to another along the same supply curve, there is a _____________. Such change is due to an increase or decrease in the product’s price. Because of the law of supply, the direction of the movement is positive.

A

change in quantity supplied (∆QS)

50
Q

An increase in supply will happen when there is an ______________ factors (economic resources). However, a decrease in the supply will occur when there is a failure to optimize.

A

Optimization in the Use of Factors of Production

51
Q

NON-PRICE DETERMINANTS OF SUPPLY

A
  1. Optimization in the Use of Factors of Production
  2. Technological Change
  3. Future Expectations
  4. Number of Sellers
  5. Weather Conditions
  6. Government Policies
52
Q

There is an increase in the supply brought by the introduction of cost-reducing innovations. However, the problems that the new technology might encounter, such as technical disruptions, can cause a decrease in supply, and freezing production.

A

Technological Change

52
Q

These can impact not just buyers but also sellers. If there is an anticipation of an increase in prices, sellers may choose to hold back the current supply, taking advantage of the future price increase, consequently decreasing market supply. There will be an increase in the present supply when sellers expect a decline in their products’ prices.

A

Future Expectations

53
Q

refers to the process or methodology of making or creating something as fully perfect, functional, or effective as possible.

A

Optimization

54
Q

A greater supply of products and services will be available if more sellers are in the market – such a variable directly impacts the quantity supplied.

A

Number of Sellers

55
Q

There is a reduction in the supply of agricultural commodities during natural disasters. It is the opposite when there is good weather.

A

Weather Conditions

56
Q

When quotas and tariffs on imported products are removed, there is an effect on the supply, and when restrictions and quotas or tariffs are lowered, there is a boost in the supply of goods in the market due to imports.

A

Government Policies

57
Q

To protect domestic/local products, importers accept the government’s quota on certain products.

A

Government Policies

58
Q

Importers pay the government tariffs or duties and taxes for their products to be accepted in a country.

A

Government Policies

59
Q

is when the quantity consumers are willing and able to buy equals the quantity producers are willing and able to sell.

A

Market equilibrium

60
Q

A ____ is an amount by which quantity supplied exceeds the quantity demanded at a given price. It usually forces the price down.

A

surplus

60
Q

If there is an increase (or decrease) in supply, as demand remains constant, it will decrease (or increase) in the equilibrium price and increase (or decrease) in the number of goods sold in the market.

A

Changes in Supply

60
Q

It equates quantity demanded with quantity supplied.

A

Equilibrium price (market-clearing price)

61
Q

is the price agreed upon by the seller to offer his good or service for sale and for the buyer to pay for it

A

Equilibrium market price

62
Q

It is the difference between what consumers are willing and able to pay for a given quantity of a good and what they pay.

A

Consumer surplus

62
Q

is a mismatch between the quantity demanded and quantity supplied as the market seeks equilibrium.

A

Disequilibrium (Market Disequilibrium)

63
Q

A _______ is an amount by which quantity demanded exceeds the quantity supplied at a given price. It usually forces the price up.

A

shortage

64
Q

As supply remains constant, an increase (or decrease) in demand increases (or decreases) both equilibrium price and quantity.

A

Changes in Demand

65
Q

The changes in both supply and demand result in a combination of individual changes.

A

Complex Cases

66
Q

are the government’s specification of minimum or maximum prices for certain goods and services when the government considers existing prices disadvantageous to the producer or consumer.

A

Price controls

67
Q

The two (2) types of price control

A

price floor
price ceiling

68
Q

The ______ is a legal minimum price below which a product cannot be sold

A

price floor (floor price)

68
Q

The _________________ states that price decreases when supply is greater than demand and increases when demand is greater than supply

A

Law of Supply and Demand

69
Q

is a legal maximum selling price above which a product cannot be sold.

A

price ceiling

70
Q

There is a _________ when a floor price is above the equilibrium price.

A

surplus

71
Q

There is a _______- when a ceiling price is below the equilibrium price.

A

shortage

Applied Economics (10 decks)

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