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ECON 102 > Exam -1 Chapter 4 Supply And Demand > Flashcards

Exam -1 Chapter 4 Supply And Demand Flashcards

1
Q

What is the value a goods determined by

A

The interaction of supply and demand

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2
Q

Demand

A

Demand is the quantity of goods that consumers are willing and able to buy a given prices. We expect an inverse relationship between quantity demanded and price.

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3
Q

When does the demand shift

A 
Demand is shifted by -
changes in the price of other goods
Income
Number of consumers
Taste
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4
Q

What do other goods include

A

Complements and substitutes

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5
Q

Supply

A

Supply is the quantity of goods that producers are willing and able to sell at a given price. We expect a direct relationship between quantity supplied and price.

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6
Q

When does supply change or shift

A 
Supply is shifted by changes in-
Cost of production 
alternative use of resources 
number of sellers 
technology
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7
Q

Both supply and demand increases by

A

Shifting rightward

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8
Q

Both supply and demand decreases by

A

Shifting leftward

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9
Q

The point where supply and demand cross is called

A

Equilibrium

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10
Q

A price higher than equilibrium price creates

A

A surplus of goods

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11
Q

A price below the equilibrium price creates

A

Shortage of goods

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12
Q

Some markets have price control such as

A

Price ceilings or
Floors
- these may leave a market in disequilibrium.
- if they are effective, they are said to be binding

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13
Q

Revenue equals

A

Price times quantity sold

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14
Q

What steps must be followed to solve any supply and demand problem

A

Determine which of supply and demand is affected
Determine if the curve will increase ( rightward shift)or decrease ( leftward shift)
Determine what happens to equilibrium price and quantity
Interpret the outcome

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15
Q

The price will be good in a market is determined by the

A

Interactions of buyers and sellers

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16
Q

Factors that influence buyers are referred to as

A

Demand

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17
Q

Factors that affect sellers are referred to as

A

Supply

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18
Q

Together demand and supply form the

A

Foundation of economics

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19
Q

Demand

A

Is the quantity of a good that consumers are willing and able to purchase at a given price

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20
Q

Law of demand

A

States that there should be an inverse relationship between price and the quantity demanded of any good. When the price of the good rises, the law of demand says that the quantity demanded of that good should fall and vice versa

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21
Q

What are the four factors that affect the level of demand?

A 
Price of other goods -P
Income - I
 number of consumers -N
 taste- T
PINT
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22
Q

What two categories do other goods fall into

A

Substitutes and complements

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23
Q

Substitute

A

Is a good that can replace the good we are considering.

Example spaghetti might be a substitute for pizza

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24
Q

Close substitute

A

Goods that can easily replace other goods .

Example pepperoni pizza and sausage pizza might be close substitutes

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25
Q

Weak substitutes

A

Other goods are poor or weak substitutes.

Example Chinese food might be only a weak substitute for pizza

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26
Q

When does the demand for a good increase

A

When the price of the substitute increases.

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27
Q

When does the demand for a good fall

A

When the price of a substitute decreases

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28
Q

Complement

A

Is it good that goes with the original good.

Example jelly is a complement for peanut butter

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29
Q

Most goods are

A

Normal goods

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30
Q

The demand for a normal good increases as

A

Consumers income increases

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31
Q

Some goods are

A

Inferior goods

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32
Q

The demand for an inferior good decreases

A

As income increases

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33
Q

As the number of consumers rises

A

Demand increases

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34
Q

Taste

A

Reflects the likes and dislikes of consumers at that moment

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35
Q

Changes in taste can

A

Increase or decrease demand, depending on whether the change was positive or negative

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36
Q

How to make a demand graph

A

Price of goods goes on the Y or vertical axis
Quantity demanded of a goods goes on the X or horizontal axis
The demand curve will be a downward sloping line. This is because of the law of demand, which states that an inverse relationship between price and quantity demanded should exist.

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37
Q

If the demand curve moves to the left or right this is called

A

A change in demand

38
Q

If the demand curve stays in the same location, but we move up or down it, that is called

A

A change in the quantity demanded

39
Q

When we say that demand has increased that means

A

The curve itself has moved

40
Q

A rightward shift is an

A

Increase in demand

41
Q

What can be the causes of the shift from D1 to D2 ?

A

Increase in the price of substitute
Increase in income of consumers
Increase in the number of consumers
Taste could change

42
Q

Supply

A

Is the quantity of a good that producers are willing and able to sell at a given price

43
Q

Supply goes hand-in-hand with

A

Profit

44
Q

Law of supply

A

States that there should be a direct relationship between price and the quantity supplied of any good. When the price of a good rises, The law of supply states that the quantity supplied of the good should rise and vice versa

45
Q

What are the four factors that affect the level of supply

A 
Cost -C
 alternative uses of resources -A
number of sellers -N
technology-T
CANT
46
Q

What are the four factors of production

A

Land labor capital and entrepreneurship

47
Q

When the land labor and capital becomes more expensive, the profit of the entrepreneur

A

Will fall, ceteris paribus, and the entrepreneur will be less willing to sell her product at a given price

48
Q

An increase in cost

A

Lowers profit and therefore supply

49
Q

A decrease in cost

A

Increases profit, and therefore supply

50
Q

Resources should move to the

A

Use that earns the greatest profit

51
Q

As the number of sellers arises, the quantity of a good supplied

A

Will be greater at any price

52
Q

Improvements in technology

A

Allow businesses to produce more goods with the same or fewer resources.
This makes the production of goods more profitable and increase the supply

53
Q

How to make a supply graph

A

Price of goods goes on the Y or vertical axis
Quantity supplied of the good goes on the X or horizontal axis
The supply curve will be an upward sloping line. This is because of the law of supply, which states that a Direct relationship between price and quantity supplied should exist

54
Q

If the supply curve moves to the left or right this is called

A

A change in supply

55
Q

If the supply curve stays in the same location, but we move up or down it, that is called

A

A change in the quantity supplied

56
Q

When we say supply has increased it means

A

The curve itself has moved

57
Q

What can cause the shift from S1 to S2?

A

A decrease in the cost of the resources such as land labor and capital.
A change in resource use.
Increase in the number of sellers or technology

58
Q

A rightward shift in supply is

A

Always an increase because the curve shifted , The more from point a to point B on the graph represents an increase in supply

59
Q

In theory the demand curve is the

A

Summation of individual demands of all consumers

60
Q

In theory the supply curve is the

A

Summation of the individual supply of all producers

61
Q

Equilibrium

A

Is a position where Either no forces are acting on a system or equally balanced forces are acting

62
Q

When does equilibrium occur

A

It occurs in markets at the point where the quantity of good that buyers wish to buy is exactly equal to the quantity of a good that sellers wish to sell

63
Q

Point of equilibrium

A

Where supply and demand are equal that is , where they cross

64
Q

As Supply and demand change so will the

A

Equilibrium price and quantity

65
Q

Remember that both supply and demand increases

A

By moving to the right, and decrease by moving to the left

66
Q

Markets can be

A

Out of equilibrium.
This is a short-term phenomenon that happens as one or both of supply and demand are shifting and the market is moving to a new position of equilibrium

67
Q

When does a shortage occur

A

When quantity demanded exceeds quantity supplied

68
Q

Price ceiling

A

Is a government imposed price control or limit on how high a price is charged for the product

69
Q

What is the problem with the price ceiling

A

It takes away the incentive of producers to create more

70
Q

Price ceilings are not

A

Always effective

71
Q

Binding vs non binding price ceiling

A

A price ceiling is the legal maximum price that can be charged.

Binding- if price ceiling is below the equilibrium price
Nonbinding – if Bryce ceiling is above the equilibrium price

72
Q

Price floor

A

Price floor -A price floor is the legal minimum price that can be charged.
Binding- if the price floor is above the equilibrium price
Nonbinding – if the price floor is Under the equilibrium price

73
Q

The opposite of a shortage is

A

Surplus

74
Q

When does a surplus occur

A

When quantity supplied exceeds quantity demanded

75
Q

How to calculate surplus

A

Quantity supplied minus quantity demanded

76
Q

Disequilibrium

A

When a market is out of equilibrium

77
Q

When a market is out of equilibrium ( in disequilibrium)

A

There are natural forces that drive it towards equilibrium

78
Q

Each market drives itself towards

A

Equilibrium and stability

79
Q

Positive economics

A

Scientific or objective study of the allocation of resources

80
Q

Revenue

A

The revenue of a business is the amount of money brought in from the sale of goods and services

81
Q

Numerically revenue is defined as

A

Price times quantity

Revenue =Price x Quantity =PQ

82
Q

When the demand increases, but the equilibrium price and quantity will

A

Increase

83
Q

Supply and demand are

A

Isolated from each other. That is, a single change that affects one curve will never affect the other

84
Q

Sometimes both demand and supply maybe moving at the same time, but it is because

A

Two separate changes according to Market, one that moved demand and another that moved supply

85
Q

Changes in demand always lead to

A

Predictable Changes in revenue

86
Q

Changes in supply cause

A

Unpredictable changes in revenue

87
Q

Remember that quantity

A

Changes in opposite directions

88
Q

Supply and demand is based on the existence of

A

Competitive markets

89
Q

Quantity supplied

A

Number of units that sellers want to sell over a specified period of time

90
Q

Quantity demanded

A

The amount of a good or service that consumers are willing and able to buy at a specific price

ECON 102 (18 decks)

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