Demand, Supply & Market Equilibrium Flashcards
What is demand?
Demand is the amount of a good that consumers are willing and able to buy at a given price.
Where the demand is going in graphs?
Demand to the ground.
When the demand increases?
When the price decreases, the quantity increases, so demand increases.
When the demand decreases?
When the price increases, the quantity decreases, so the demand decreases.
What cause a demand curve?
A change in price will always cause a movement along the demand curve.
What will cause a shift?
A change in any other factor of demand will cause a shift.
What is PASIFICE?
P-population
A-advertising and Branding
S-substitutes
I-income
F-fashion and trends
I-interest rates
C-complimentary goods
E-external shocks
What is supply?
Supply is the amount of a product which suppliers will offer to the market at a given price.
Factors that may cause a shift in the supply curve:
- Changes in the cost of production
- Changes in technology
- Indirect taxes
- Subsidies
- Natural factors (external shocks, weather etc)
Give an example of a scarce resource.
Oil
What is market equilibrium?
Where demands meets supply this is called the equilibrium price and gives equilibrium price and equilibrium quantity. This is also known as market clearing price, there is no stock left (supply) and no buyers left (demand). And also is a balance between demand and supply.
Define government subsidy?
Free money from the government.
Define disposable income.
What consumers have left over after bills are paid:
1. Vacation
2. Luxuries
3. Investments
What is excess demand?
Excess demand - a situation where the market price is below the equilibrium price, thus creating a shortage in the market ( it is not in the businesses interest to make the good/service).
What is excess supply?
Excess supply - a situation where the market price is above the equilibrium price, thus creating a surplus in the market (more businesses want to produce the good/service to profit).
