Supply And Markets Flashcards
What is demand
Quantity of a product that consumers want and are able to buy, at a given price and time
What is supply
Quantity of a product that suppliers are willing and able to supply to a market at a given price and time
What are the labels for the X and Y axes for a supply and demand diagram
X= Quantity (demanded or supplied)
Y= Price
How many curves on a supply and demand diagram
2, a supply curve and a demand curve
What curve usually slopes downwards and why
Demand curve usually sloped downwards
Because it shows as price of a product increases, demand decreases. Fewer people are able or willing to buy
What does supply curve show the relationship between
Price and quantity supplied
What curve slopes upwards usually and why
Supply curve usually slopes upwards, because it shows that higher the price charged for a product, higher quantity supplied
Why does quantity supplied increase with price
- Producers and sellers aim to maximise profit.
- Other things being equal, higher price results in higher profit.
- Higher profit provides incentive to expand production and increase supply.
Disadvantage of increasing supply
Increasing supply will increase costs. Firm will only produce more if price increases by more than the costs
What is equilibrium price
- When quantity that buyers demand is the same as the quantity the sellers wish to supply
Where is the equilibrium price (Pe) and equilibrium quantity (Qe)
Where the two curves meet
What is a surplus and when does it happen
- If price of a product increases, it’ll cause a movement to the left along its demand curve and cause movement to the right along its supply curve
- This would mean quantity demanded would be less than quantity supplied, so there would be excess supply therefore a surplus in the market
What is a shortage and when does it happen
- If price of a product decreases, it’ll cause a movement to the right along its demand curve and cause movement to the left along its supply curve
- This would mean there would be more demand than supply, so there would be excess demand therefore a shortage in the market
What’s the difference between price and other factors in terms of movement it causes to the demand and supply curves
Price causes a movement ALONG its supply and demand curves
Other factors cause a SHIFT in the supply and demand curves
What are the 8 factors that can cause a shift in the demand curve
1) Substitutes
2) Complementary products- products that are used together
3) Consumer income
4) Consumer tastes/preferences
5) Advertising and branding
6) Demographics (population)
7) Seasonal changes
8) External shocks (war, Covid, weather)
