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applied econ > L2: supply and demand (INCLUDED IN FINALS) > Flashcards

L2: supply and demand (INCLUDED IN FINALS) Flashcards

1
Q

principles of economics by?

A

Nicholas Gregory Mankiw

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2
Q

is a group of buyers and sellers of a particular product.

A

market

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3
Q

____________________________ is one with many buyers and sellers, each has a ______________ effect on price.

A
  • competitive market
  • negligible
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4
Q

All goods exactly the same

A

perfectly competitive market

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5
Q

Buyers & sellers so numerous that no one can
affect market price

A

perfectly competitive market

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6
Q

the buyers and seller on the perfectly competitive market are called?

A

“price taker”

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7
Q

true or false?

supply is the quality of a product that a consumer is willing and unable to purchase at a given price and at any point in time

A

((demand)) is the ((quantities)) of a product that a consumer is willing and ((able)) to purchase at a given price and at ((a given)) point in time

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8
Q

Indicates the quantity of a commodity that will be in demand at different prices

A

demand

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9
Q

The quantity demanded of any good is the?

A

amount of the good that buyers are willing and able to purchase.

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10
Q

law of demand

A

the claim that the quantity demanded of a good falls when the price of the good rises, other things equal (ceteris paribus)

↑↑price↑↑ = ↓↓demand↓↓

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11
Q

demand schedule

A

a table that shows the relationship between the price of a good and the quantity demanded

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12
Q

The quantity demanded in the market is the sum of the quantities demanded by all buyers at each price.

A

Market Demand versus Individual Demand

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13
Q

demand curve

A
  • a graph that shows the relationship between the price and quantity demand
  • downward sloping
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14
Q

demand of a single buyer

A

individual demand

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15
Q

total quantity demanded of all the buyers in the market

A

market demand

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16
Q

enumerate the demand curve shifters

A
  1. Number (#) of buyers
  2. Income
  3. Prices of Related Goods
    3.1 Substitute/Alternative products
    3.2 Complementary goods/products
  4. Taste (/preferences)
  5. Expectations
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17
Q

what happens to the demand curve when the demand either increases or decreases

A

demand increase
- pushes the demand curve to the right
- [demand curve]»»

demand decrease
- pushes the demand curve to decrease
- ««[demand curve]

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18
Q

shows how price affects quantity demanded, other things being equal.

A

the demand curve

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19
Q

These “other things” are non-price determinants of demand (i.e., things that determine buyers’ demand for a good, other than the good’s price).

A

demand curve shifters

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20
Q

how does the Number (#) of buyers affect the quantity demanded and the demand curve

A
  • Increase in # of buyers increases the quantity demanded at each price
  • shifts the D curve to the right.
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21
Q

how does the income affect the quantity demanded of normal goods?

A
  • Demand for a normal good is positively related to income.
  • An increase in income causes an increase in the quantity demanded for normal goods
  • shifts D curve for normal goods to the right.
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22
Q

how does the income affect the quantity demanded of inferior goods?

A
  • Demand for an inferior good is negatively related to income.
  • An increase in income causes a decrease in the quantity demanded for inferior goods
  • shifts D curves for inferior goods to the left.
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23
Q

Two goods are substitute if?

A

if an increase in the price of one causes an increase in demand for the other.

( Prices of Related Goods
3.1 Substitute/Alternative products)

24
Q

Examples:
- pizza and hamburgers
- Coke and Pepsi
- laptops and desktop computers,
- CDs and music downloads

A
  1. Prices of Related Goods
    3.1 Substitute/Alternative product
25
Q

Two goods are complements if?

A
  • if an increase in the price of one causes a fall in demand for the other.

( Prices of Related Goods
3.2 Complementary goods/products)

26
Q

Example:
- computers and software
- college tuition and textbooks
- bagels and cream cheese
- eggs and bacon

A
  1. Prices of Related Goods
    3.2 Complementary goods/products
27
Q

Anything that causes a shift in ___________ toward a good will increase demand for that good and shift its D curve to the right.

A
  1. Taste (/preferences)
28
Q

Example:
- The Atkins diet became popular in the ’90s, caused an increase in demand for eggs, shifted the egg demand curve to the right.

A
  1. Taste (/preferences)
29
Q

an increase in taste for a good, causes ______________________ for the demand of said good

A

an increase

30
Q

The quantity supplied of any good is?

A

the amount that sellers are willing and able to sell.

31
Q

law of supply

A

the claim that the quantity supplied of a good rises when the price of the good rises, other things equal

↑↑price (of good)↑↑ = ↑↑quantity supplied↑↑

32
Q

A table that shows the relationship between the price of a good and the quantity supplied.

A

Supply schedule

33
Q

The quantity supplied in the market is the sum of the quantities supplied by all sellers at each price.

A

Market Supply versus Individual Supply

34
Q

shows how price affects quantity supplied, other things being equal.

A

The supply curve

35
Q

enumerate the supply curve shifters

A
  1. Input Prices
  2. Technology
  3. # of Sellers
  4. Expectations
36
Q

Examples
- wages,
- prices of raw materials.

A
  1. Input Prices
37
Q

how do input prices affect the supply curve?

A
  • A fall in input prices makes production more profitable at each output price, so firms supply a larger quantity at each price, and the
  • S curve shifts to the right.

↓↓input prices↓↓ = ↑↑supply↑↑

38
Q

determines how much inputs are required to produce a unit of output.

A
  1. Technology
39
Q

how does technology affect the supply curve?

A
  • A cost-saving technological improvement has the same effect as a fall in input prices,
  • shifts S curve to the right.

↑↑technology↑↑ = ↑↑supply↑↑

40
Q

how does the # of Sellers affect the supply curve?

A
  • An increase in the number of sellers increases the quantity supplied at each price,
  • shifts S curve to the right.

↑↑# of sellers↑↑ = ↑↑supply↑↑

41
Q

Examples:
- Events in the Middle East lead to expectations of higher oil prices.
- In response, owners of Texas oilfields reduce supply now, save some inventory to sell later at the higher price.
- S curve shifts left.

A
  1. Expectations
42
Q

In general, sellers may adjust supply* when their expectations of future prices change. (*If good not perishable)

A
  1. Expectations
43
Q

when quantity supplied and quantity demanded is equal.

A

Equilibrium

44
Q

the price that equates quantity supplied with quantity demanded

A

Equilibrium Price

45
Q

the quantity supplied and demanded at the equilibrium price

A

Equilibrium Quantity

46
Q

when quantity supplied is greater than quantity demanded

A

Surplus (a.k.a. excess supply)

47
Q

when quantity demanded is greater than quantity supplied

A

Shortage (a.k.a. excess demand)

48
Q

Facing a ______________, sellers try to increase sales by cutting price, causing QD to rise and the QS to fall

…which reduces the______________.

Prices continue to fall until market reaches equilibrium.

A

surplus

49
Q

Facing a ______________, sellers raise the price, causing QD to fall

…which reduces the ______________.

Prices continue to rise until market reaches equilibrium.

A

shortage

50
Q

not a question

A

Terms for Shift vs. Movement Along Curve

  • Change in supply: a shift in the S curve occurs when a non-price determinant of supply changes (like technology or costs)
  • Change in the quantity supplied: a movement along a fixed S curve occurs when P changes
  • Change in demand: a shift in the D curve occurs when a non-price determinant of demand changes (like income or # of buyers)
  • Change in the quantity demanded: a movement along a fixed D curve occurs when P
    changes
51
Q

CONCLUSION:

A

How Prices Allocate Resources

One of the Ten Principles from Chapter 1: Markets are usually a good way to organize economic activity.

In market economies, prices adjust to balance supply and demand. These equilibrium prices are the signals that guide economic decisions and thereby allocate scarce resources.

52
Q

In market economies, ___________ are the signals that guide economic decisions and allocate scarce resources.

A

prices

53
Q

We can use the supply-demand diagram to analyze the effects of any event on a market:

A
  1. First, determine whether the event shifts one or both curves.
  2. Second, determine the direction of the shifts.
  3. Third, compare the new equilibrium to the initial one.
54
Q

If the market price is ___________ equilibrium, a ___________ results, which causes the price to fall.

If the market price is ____________ equilibrium, a _____________ results, causing the price to rise.

A
  • above
  • surplus
  • below
  • shortage
55
Q

what determines the market equilibrium?

A

The intersection of S and D

56
Q

who uses the supply and demand model to analyze competitive markets?

A

Economists

applied econ (6 decks)

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