Supply & Demand

Question 1

Demand & Supply

Answer 1

Determines prices and why prices change

Question 2

Demand

Answer 2

Consumption (Income)
Price x Quantity demanded (inverse relationship)
Negative slope

Question 3

Supply

Answer 3

Production (Costs)
Price x Quantity produced (positive relationship)
Positive slope

Question 4

Equilibrium

Answer 4

When price (P*) in which the quantity demanded (Qd) is = to the quantity supplied (Qs)
Equilibrium means stability
market forces to move prices and quantities towards equilibrium –> movement along the curve.

Question 5

Excess Supply (Surplus)

Answer 5

Qd < Qs price goes down

Question 6

Excess Demand (Shortage)

Answer 6

Qd > Qs price goes up

Question 7

Ceteris Paribus

Answer 7

“Other things being equal” or “everything held constant”

Question 8

Factors That Affect Demand

Answer 8

Income
Prices of complements
Tastes or preferences
Population
Expectations

Question 9

Factors that Affect Supply

Answer 9

Production Costs
Technology
Natural Causes
Taxes and Regulations
^^causes changes in the Equilibrium