Supply and Demand Flashcards
Law of Supply?
- price decreases, supply decreases
- price increases, supply increases
- hint: they move in the Same direction
Supply schedule?
- list how much of a good or service a producer is willing to offer at each price
- market supply schedule list how much producers are willing to offer
Supply Curve?
•Graphic that displays data from supply schedule
•Market supply curve displays data from market and supply schedule
• S= supply
Same
Up
Demand?
The willingness to buy a good or a service AND the ability to pay for it
Law of Demand?
- price decreases, demand increases
- price increases, demand decreases
- hint: they move in Different directions
Demand schedule?
- list of how much an INDIVIDUAL is willing to purchase at every price
- market schedule shows how ALL customers are willing to purchase at each price
Demand Curve?
•Graphic that displays data from demand schedule
•market demand curve displays data from the market demand schedule
• D=demand
Different
Down
Equilibrium price
Is the price at which the individual quantity demanded and individual quantity supplied are equal
When does market equilibrium occur?
When all quantity demanded from customers equals the quantity supplied from all producers
Surplus?
•results when the quantity supplied is greater than the quantity demanded
Shortage?
•Results when the quantity demanded is greater than the quantity supplied
Price Ceilings?
- legal maximum price for a good or service
* ex: tickets to concert or sporting event, gasoline prices each day
Price floor?
- legal minimum price for a good or a service
* ex: minimum wage, tobacco products
Price motivation?
•consumers want to buy at low prices
•producers want to sell at high prices
•incentives are ways to encourage people to take certain actions
-sales and discounts
-BOGO: buy one get oneProfit?
Marginal revenue, total revenue, and profit maximizing output
Marginal revenue?
Money made from the sale of each additional unit of output
Total revenue?
A company’s income from selling its products
Profit maximizing output?
Level of production in which a business realizes its greatest amount of profit
Production cost?
Fixed costs, variable cost, total cost, and marginal cost.
Fixed cost?
Cost that the owner incurs no matter how much the my produce
Variable cost?
Cost dependent upon the level of production output
Total costs?
Sum of the fixed and variable costs
Marginal cost?
Extra cost of producing one more unit
Marginal product?
Change in total output brought about by adding one more worker
Increasing returns?
Occurs when hiring workers causes marginal product to rise
Diminishing revenue?
Uccurs when hiring workers causes marginal product to lower
What are factors that affect demand?
- willingness to pay
- ability to pay
- market size
- consumer taste
- consumer expectations
- substitutes
- complements
Substitutes?
Products used in place of other products to satisfy needs or wants
Complements?
Products used together
What are factors that affect supply?
- input costs
- labor productivity
- technology
- government action
- producer expectations
- number of producers
Government action?
Taxes, regulation, etc…
What does surplus indicate?
Prices are too high
What does shortage indicate?
Prices are too low
Total profit?
All the profits made from all revenue
Regulations?
Rules that you have to work withen
What do lower prices encourage?
It encourages the customers to purchase a business products at low prices
How do business owners decide on the right number of workers?
They look at the marginal production, And then the increasing and diminishing returns
How does a business calculate total profit?
The review their fixed, variable, total, and marginal cost
What motivates producers to increase supply?
When the demand for their product goes up
When customers demand more goods and services at every price what will happen to the equilibrium
It will push to a higher price
Supply?
The willingness and ability of producers to offer goods and services
Change in quantity demanded
- an increase or decrease in the amount demanded because of change in price
- change refers to change along the curve itself
- each point represents a new quantity demanded
- DOES NOT SHIFT THE DEMAND CUVE ITSELF
Change in quantity supply
- an increase in the amount supplied because of a change in price
- change refers to movement along the curve itself
- each point represents a new quantity supplied
- DOES NOT SHIFT THE SUPPLY CURVE ITSELF
Change in demand
- something prompts customers to but different amounts at every price
- CREATES A SHIFT IN THE DEMAND CURVE
Change in supply
- something prompts producers to sell different amounts at every price
- CAUSES A SHIFT IN THE SUPPLY CURVE
What is change in quantity?
It is where the quantity changes but the price does not
What is change in supply?
When there is change in quantity and price
