supply&demand Flashcards
what does demand represent?
the behavior of buyers
what does a demand cure show?
quantity demanded at various prices
define quantity demanded
quanitty buyers are willing/able to purchase at a price
the demand cure:
- has a negative slope
- as price decreses the quantity demanded increases
differences between a change in demand and a change in quantity demanded
-change in demand: shift (left or right) in the demand curve
- change in quantity demanded: movement along the same demanded curce due to change in price
define the law of demand
- higher price for good/service= less demand
describe the shifts in the demand curve
- decrease in demand–> left shift (low willingless to pay for same Q, less quantity demanded at same price)
- increase in demand–> right shift (greater willingless ti pay for same Q, greater Q demanded at the same price)
describe important demand shifters
- changes in prices of related goods/services (eg substitutes complementary products)
- change in income and nature of goods
- changes in tastes
- changes in expectations
- changes in the number of consumers.
define supply
behavior of sellers
define supply curve
quantity supplied at various prices
define quantity supplied
quantity that producers are willing and able to sell at a particulaer price.
describe the supply curve
-increasing curve
- positive slope
describe the shifts along the supply curve
- increase in supply–> right shift along the supply curve
- decrease in supply-> left shift along the supply curve
which are some supply shifters:
- input prices: decrease in price input, more supply
- prices related to goods/services (supply less if profits decrease)
- technology
- expectations
- number of producers
define equilibrium
when supply = demand
how to find the equilibrium price and quanitity
it occurs at point E–> where supply and demand interesect
define a surplus
-> when quantiity supplied exceeds quantity demanded
WHEN PRICE IS ABOVE EQUILIBROIUM LEVEL
–> dont last
describe a shortage
-> when quantity demanded exceeds quantity supplied
- PRICE IS BELOW EQUILIBRIUM LEVEL.
-> dont last because sellers will increase the price.
whan happens when demand curve shifts
- increase in demand, leads to movement along supply curve as equilibirum price is higher and equilibirum quantity is higher.
whatv happens when the curpply curve shifts
- decrease in supply–> movement slong demand curve due to higher equilibirum price but lower equilbirum quantity.
consumer vs producer surplus
consumer surplus–> willingless to pay- acrual price paid
producer surplus–> price received- willingless to sell
