Supply and Demand Flashcards
Market
where buyer and sellers come together for the exchange of goods and services
Demand
the qty of goods or services consumers are willing and able to buy at different price points
Law of demand
negative casual relationship, as price increases the demand decreases
Market demand curve
sum of all individual demand for a product at each price level
Non-price determinants of demand
mnemonic - RIPEN
- Related goods ( in the cases of substitutes and complements
- income
- preferences and tastes
- expectations of future price
- number of consumers
Inferior goods and normal goods
inferior goods are goods when consumer’s income fall, the demand rises.
Normal goods are goods when consumers income rise, the demand rise
What causes a movement along the demand and supply curve
caused by price changes only.
Fall in price causes demand to expand while an increase in price causes quantity demand to contract
Fall in price causes supply to contract whereas an increase in price causes the supply to expand
Supply
the amount of goods or services that firms are willing and able to provide at any particular price, per time period
law of supply
a positive / direct relationship between quantity supplied and price
Market supply
sum of all individual supply of producers at each price level for a given product
Non-price determinants of supply
mnemonic - CISTERNS
- Costs of FOP
- Indirect taxes
- Subsidies
- Technology change
- Expectations of future price
- Related products ( Joint supply or competitive supply)
- Number of firms in the industry
- Supply shock (natural disaster)
Competitive supply and joint supply
Join supply is when the price of good A increases, the supply of good B increases cuz no competing resources. e.g. Sheep can be utilized for meat, milk products, wool, and sheepskin
Comp supply is when the output of one product prevents or limits the production of another product due to competing resources. e.g. a farmer can plant potatoes or carrots, these may require the same FOP
How does subsidy and indirect tax shift the supply curve ?
subsidy shifts the supply curve down
Indirect tax shifts the supply curve up
