Supply and Demand

Question 1

Law of Supply

Answer 1

Positively correlated, they can be infinite supply

Question 2

Law of Demand

Answer 2

Negatively correlated, once you have enough of something you don’t want any more (definite). Price rises, quantity falls

Question 3

Substitutes

Answer 3

A good or service in the market that can be replaced (easily interchangeable); eg two expo markers; one good rises in price, causing another to have greater demand

Question 4

Complements

Answer 4

If the price of one goes up, the price of the will go up as well; hot dogs and hot dog buns

Question 5

Demand Curve

Answer 5

Plotted demand schedule; sum of potential individual buyer’s demand curves
Demand curve SHIFTS if Qd changes at a given price
If price changes but the curve hasn’t shifted, MOVEMENT is produced along the curve

Question 6

Movement along S or D

Answer 6

Only happens when price changes

Question 7

Factors for Demand Shift

Answer 7

1. Preferences
2. Income
3. Price of other goods
4. Number of buyers
5. Belief about future

Question 8

Factors for Supply Shift:

Answer 8

1. Input prices
2. Technology (increased output, same input)
3. Number of sellers
4. Sellers beliefs about future