Supply and Demand Flashcards
What is the Law of Demand?
What consumers are willing and able to pay for a quantity of a good
What are the reasons for downward sloping demand curves?
The income effect, Diminishing marginal Utility, Substitution effect
What is the Income Effect?
The income effect suggests that as the price of a good decreases, consumers effectively experience an increase in real income because they can purchase the same quantity of the goods for less money.
What is Diminishing Marginal Utility?
A consumer consumes more of a good, the additional satisfaction or utility given will decrease through each additional unit.
What is the Substitution Effect?
The substitution effect occurs when consumers switch from relatively more expensive goods to a good that has become relatively cheaper.
What is the difference between quantity demanded and demand?
Quantity demanded refers to the specific quantity of a good or service consumers are willing and able to purchase at, demand represents the entire relationship between the range of prices available and what the consumer is willing and able to purchase.
What are the shift factors of demand?
TRIBE
Taste
Related Goods
Income
Buyers
Buyers
Expectations
On the graph, an increase in demand is…
A shift to the right
On the graph, and decrease in demand is…
A shift to the left
What is the Law of Supply?
An increase in the demand for a good results in an increase of supply for a good or service.
What is the reason for an upward sloping supply curve?
The supply curve moves upward because as the price of a good or service increases, producers are generally willing to supply a greater quantity due to the expectation of higher profits, reflecting the positive relationship between price and quantity supplied in the market.
What is the Law of increasing marginal costs?
The law of increasing marginal cost states that as a firm produces more units of a good or service, the additional cost incurred for each successive unit rises, reflecting the diminishing efficiency and productivity gains associated with expanding production.
What is the difference between quantity supplied and supply?
Quantity supplied refers to the specific amount of a good or service that producers are willing and able to sell at a particular price, while supply encompasses the entire relationship between the quantity of a good producers are willing to sell and the range of prices in a given time period, often illustrated by a supply curve.
What are supply shift factors?
STONER
Subsidies and taxes
Technology
Other goods
Number of Sellers
Expectations (future price and availability)
Resources
On the graph, an increase in supply is…
A shift to the right
