lesson 7 Flashcards
factors that influence demand
- income
- if the product is in fashion
- taste of consumer
contraction of demand is caused by…
a rise in price
extension of demand is caused by…
a decrease in price
what is consumer surplus?
the extra amount that consumers would pay above what they actually pay
people pay less for a product than they are willing to
what is producer surplus?
the minimum prices a firm is willing to sell their product at
if demand curve shifts to the right what does it mean?
demand has increased
if demand curve shifts to the left what does it mean?
demand has decreased
Causes for change in demand
- Change in income
- Changes in the price of alternative goods
- Changes in the price of complements
- Changes in taste or fashion
- Successful advertising campaigns
- Changes in population size and age distribution
A rise in price causes what to happen to supply?
An extension
A fall in price cause what to happen to supply?
A contraction
Causes of changes in supply
- Changes in the costs of production
- Changes in productivity
- Advances in technology
- Indirect taxes
- Subsidies
- Changes in the price of other goods
What is demand?
Consumer willingness and ability to buy something
Why does a market not stay in disequilibrium?
Because the price would adjust to find a new equilibrium
What is a subsidy?
Gift of money from government designed to encourage production as the producers do not need to pay them back
What happens when taxes are placed on an item?
It raises the costs and discourages suppliers
