LESSON 2 SUPPLY AND DEMAND Flashcards
The willingness and ability of buyers to purchase different
quantities of a good*/ at different prices/ during a specific time period
(per day, week, etc).
Demand
Unless both willingness and ability to buy are present, there is no
demand, and a person is not a buyer. TRUE OR FALSE
TRUE
As the price of a good rises, the quantity demanded of the good falls, and that as the price of a good falls, the quantity demanded of the good rises
Law of Demand
Price of a good and quantity demanded of it are inversely related
ceteris paribus.
is the specific number of units of a good that individuals are willing
and able to buy at a particular price during a time period
Quantity demanded
It is the graphical representation of the inverse relationship between price and quantity demanded specified by the law of demand.
A (downward-sloping) demand curve
This states that, for a given time period, the marginal utility
(additional satisfaction) gained by consuming equal successive
units of a good will decline as the amount consumed increases.
The law of diminishing marginal utility
represents the price-quantity
combinations of a particular good for a single buyer.
individual demand curve
represents the price-quantity combinations
of good for all buyers.
market demand curve
A change in quantity demanded is the same as a change in demand. TRUE OR FALSE?
FALSE (NOT SAME)
A movement from one point to another point on the same demand curve caused by a change in the price of the good.
Change in quantity demanded
A change (increase) in demand means that individuals are willing and able to
buy more units of the good at each and every price
Change in demand
Factors Causing the Demand Curve to Shift
- Income
- Preferences
- Prices of related goods
- Number of buyers
- Expectations of future prices
Change in quantity demanded is caused by rationing device. TRUE OR FALSE?
FALSE (PRICE)
As a person’s income changes, that individual’s demand for a
particular good will not change. TRUE OR FALSE
FALSE (IT WILL CHANGE)
is a good for which demand
rises (falls) as income rises (falls)
NORMAL GOODS
demand falls as income rises
inferior good
demand does not change as income rises or falls
neutral good
People’s preferences affect the amount of a good they bare willing to
by at a particular price. TRUE OR FALSE
TRUE
A change in preferences in favor of a good shifts the demand curve
left ward. TRUE OR FALSE?
FALSE ( RIGTH WARD)
Goods are_________If they satisfy similar needs or desires.
If the price of a good rises, the demand for the substitute
rises.
Substitute
Goods are_________if they are consumed jointly. If two
goods are complements, as the price of one rises, the
demand for the other falls.
complement
More buyers mean less demand. TRUE OR FALSE
FALSE ( HIGHER DEMAND)
Buyers who expect the price of a good to be higher next month may
buy it now, thus increasing the current demand for the good. TRUE OR FALSE
TRUE
The willingness and ability of sellers to produce and offer to sell
different quantities of a good*/ at different prices/ during a specific
time period (per day, week, etc).
SUPPLY
As the price of a good rises, the quantity supplied of the good rises, and as
the price of a good falls, the quantity demanded of the good falls,
Law of Supply
is the specific number of units of a
good that sellers are willing and able to sell at a
particular price during a time period.
Quantity supplied
holds for the production
of most goods. It does not hold when there
is no time to produce more units of a good,
or if it cannot be produced anymore
Law of Supply & Supply Curve
This law states that as ever larger
amounts of variable inputs are combined with fixed inputs, eventually
the marginal physical product of the variable input will decline.
law of diminishing marginal returns
represents the price-quantity
combinations of a particular good for a single seller
individual supply curve
represents the price-quantity combinations
for all sellers of a particular good. This is derived by “adding up”
individual supply curves
market supply curve
numerical tabulation of the quantity supplied of a
good at different prices; the numerical representation of the law of
supply
Supply schedule
An increase in supply shifts the entire supply curve to the left. TRUE OR FALSE
FALSE ( RIGHT)
A decrease in supply shifts the entire supply curve to the left. TRUE OR FALSE
TRUE
Factors Causing the Supply Curve to Shift
- Prices of relevant sources
- Technology
- Prices of other goods
- Number of sellers
- Expectations of future price
- Taxes and subsidies
- Government restrictions
If the price of a resource falls, producing the good becomes less
costly. TRUE OR FALSE
TRUE
With lower costs and prices unchanged, the profit from producing
and selling the good has decreased. TRUE OR FALSE
FALSE( INCREASED)
Is the body of skills and knowledge concerning the use of
resources in production
Technology
An advance in technology may lead to the ability to produce less
output with a fixed amount of resources, reducing per-unit
production costs. TRUE OR FALSE
FALSE ( MORE OUTPUT)
If the per-unit production costs of a good decline, we expect the
quantity supplied of the good at each price to increase. TRUE OR FALSE
TRUE
Prices of Relevant Resources LEFT OR RIGHT WARD SHIFT?
RIGHTWARD SHIFT
Technology LEFT OR RIGHT-WARD SHIFT?
RIGHT WARD SHIFT
If more sellers begin producing a good, the supply curve will shift leftward.TRUE OR FALSE
FALSE ( RIGHT WARD)
Expectations of Future Prices LEFT OR RIGHT-WARD SHIFT?
LEFT WARD SHIFT
If the tax is removed, the supply curve will LEFT OR RIGHT-WARD SHIFT?
RIGHT WARD SHIFT
is a monetary payment by government to a producer of a
good.
Subsidy
Subsidy will lead to a?LEFT OR RIGHT-WARD SHIFT?
LEFT WARD SHIFT
Government Restrictions LEFT OR RIGHT-WARD SHIFT?
LEFT WARD SHIFT
A movement along the supply curve. It can only be caused by a change in the
price of the good.
Change in quantity supplied
excess supply; a condition in which the quantity supplied is
greater than the quantity demanded.
Surplus
excess demand; a condition in which the quantity demanded is
greater than the quantity supplied.
Shortage
the price at which the quantity
demanded of the good equals the quantity supplied
Equilibrium Price (Market-Clearing Price)
the quantity that corresponds to equilibrium price;
the quantity at which the amount of the good that buyers are willing and
able to buy equals the amount that sellers are willing and able to sell, and
both equal the amount actually bought and sold.
Equilibrium Quantity
a price at
which the quantity demanded does not equal the quantity supplied
Disequilibrium Price
a state of either surplus or shortage in a market
Disequilibrium
is the difference between the maximum price a
buyer is willing and able to pay for a good or service and the price
actually paid for it
Consumers’ Surplus
is the difference between the price
sellers receive for a good and the minimum or lowest price for which
they would have sold the good
Producers’ (Sellers’) Surplus
Consumers’ Surplus + Producers’ Surplus
Total Surplus
if two
goods are complements, as the price of one rises, the
demand for the other rises. T OR F ?
FALSE (DEMAND FALLS)
