(PAPER 1) 1.2.3 markets Flashcards
equilibrium price definition
the price where supply and demand are equal
excess supply definition
position where supply is greater than demand at a given price and there are unsold goods in the market
excess demand definition
position where demand is greater than supply at a given price and there are shortages in the market
increase in demand=
decrease in demand=
increase in quantity decrease in price
decrease in quantity increase in supply
increase in supply=
decrease in supply=
increase in quantity decrease in price
decrease in quantity increase in price
increase in supply and demand=
increase in quantity
(when BOTH demand and supply increase or decrease price stays the same because they have increased or decreased by the same amount)
decrease in supply and demand=
decrease in quantity
(when BOTH demand and supply increase or decrease price stays the same because they have increased or decreased by the same amount)
things that affect supply:
- changes in cost of production
- indirect taxes
- introduction of new technology
- external stock
- government subsidies
things that affect demand:
- changes in prices of substitutes and complimentary goods
- demographics
- advertising and branding
- changes in consumer income
- fashion tastes and preferences
- seasonality
the graph
supply = / demand = \ equilibrium price is the point where they meet inc in supply= / > / P1&Q1 > P2&Q2 dec in supply= / < /
price I I I I I I\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ Quantity