Supply and Demand Flashcards
Define a market
A market is any situation where buyers and sellers come into contact to exchange goods and services
Define demand
The desire to buy a good or service at a given price, backed by the ability to pay for that good or service
Define the determinants of demand
The factors that affect the demand for a good or service
Define ceteris paribus
Assuming other things remain equal
What are the determinants of demand
Income Price of substitutes Price of compliments Tastes, fashions and crazes Population changes The effectiveness of advertising Social change Seasonal demand Expectations Government legislation
Define supply
The quantity of a good or service that suppliers wish to sell over a range of prices within a time period
Define determinants of supply
The factors that affect the supply of a good or service
What are the determinants of supply
The price of inputs The price of other goods Technology Taxes and subsidies Expectations Weather Seasons Natural resources Government policy World and political affairs
Define equilibrium
A state of balance, or a state of rest, where opposing forces are equal and there is therefore no tendency to change, ceteris paribus. In the free makers this is the point where Qs = Qd
What is excess supply (Glut)
This is if price is higher than equilibrium
What is excess demand (shortage)
This is if price is lower than equilibrium
Define indeterminate
This means we cannot tell how it will change ( it may increase or decrease or remain the same )
