Q3- Supply and demand Flashcards
Define demand
quantities that consumers are willing and able to buy per period of time at various prices
What are the determinants of demand?
- price of product in question(affects quantity demanded
- income available to household
- household’s amount of accumulated wealth
- the prices of related products available to household
- household’s tastes and preferences
- household’s expectations about future income, wealth, and prices
What causes a shift in Demand?
- price of related/substitute products
- time of year
- trends
- weather
- NOT INCREASE OR DECREASE IN PRICE OF PRODUCT
what causes a shift in Quantity demanded?
price
What does the law of demand state?
States that there is a negative, or inverse, relationship between quantity demanded and price
Demand curve slopes ________
downward
________ is the sum of all household wages, salaries, profits, interest payments, rents, and other forms of earnings in a given period of time
income
Income is a ______ measure
flow
_________ is income measured in terms of the amount of goods and services that it will buy.
Real income
Real income will _______ if either actual income increases or prices fall
increase
________ is the effect that a price change has on real income and therefore on the quatntiy demanded of a product
income effect
______ or ______ is the total value of what a household owns minus what it owes
Wealth/net worth
Wealth is a ______ measure
stock
def. goods for which demand goes up when income is higher and for which goes down when income is lower
normal goods
def. goods for which demand falls when income rises
inferior goods
def. goods that can serve as replacements for one another; when the price of one increases, demand for the other goes up
substitutes
def. goods that “go together” a decrease in price for one results in an increase in demand for the other, and vice versa
complements
Define supply
the quantities that producers are willing and able to sell per period of time at various prices
What is the goal of producers?
Maximise profits
A table showing how much of a product firms will supply at different prices is called a _______
supply schedule
quantity supplied represents ________
the number of untis a product that a firm would be willing and able to offer for sale at a particular price during a given period of time
What does the law of supply state?
states there is a positive relationship between price and quantity of a good supplied
What are some determinants of supply?
- Product cost:
- price of required inputs (labour, land, capital)
- business taxes levied
- technologies that can be used to produce the product ]
- availability of resources
- Price of related products
def. sum of all the quantities of a good or service supplied per period by all the firms selling in the market for that good or service; addition of individual firm’s supply curves (add quantities)
market supply
