Supply and Demand Flashcards
Quantity Demanded
The total number of units purchased at the specific price
Downward sloping line
Quantity Supplied
The total number of units supplied at the specific price
Upward sloping line
Demand Schedule
The table/graph that shows quantities demanded at each price
Law of Supply
Higher price leads to a higher quantity supplied. Lower price leads to a lower quantity supplied.
Law of Demand
Higher price leads to a lower quantity demanded. Lower price leads to a higher quantity demanded.
Surplus
Price above equilibrium leads to greater supply and less demand
Shortage
Price below equilibrium leads to greater demand and less supply
Factors Affecting Demand
Income
Price of Substitutes/Compliments
Number of Consumers
Consumer Preference
Consumer Expectation
Factors Affecting Supply
Price
Number of Suppliers
Technology
Government Taxes/Subsidies
Seller Expectations
Complimentary Good
As demand for product A increases demand for product B increases
Substitute
As demand for product A increases demand for product B decreases
Normal Good
As income rises demand for the good rises
Inferior Good
As income rises demand for the good decreases
Change in Qd
A movement along the demand curve
Shift in Qd
A movement/shift of the entire demand curve
Change in Qs
A movement along the supply curve
Shift in Qs
A movement/shift of the entire supply curve
Price Ceiling
Max price
Creates shortage since D>S
Price Floor
Minimum price
Creates surplus since S>D
Deadweight Loss
Loss in social surplus when the price is higher than equilibrium
Producer Surplus
The amount gained from selling a price higher than the supplier was willing to accept
Consumer Surplus
Benefit to consumer from buying a good at a lower price than they were willing to spend
What happens to the price and quantity bought and sold in the cocoa market if there is a drought and the same time a study releases about the health benefits of cocoa?
The drought will cause an upward shift (left towards y-axis) in supply as crops will be destroyed.
The study will create a demand shift to the left as overall demand increases.
As supply decreases the prices will increase. As demand increases it will cause a secondary increase in price and quantity sold.
