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T2.Demand and Supply > T2.Demand and Supply > Flashcards

T2.Demand and Supply Flashcards

1
Q

Ceteris Paribus

A

Other things equal.

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2
Q

Change in Quantity Demanded

A
  1. In Demand curve where Price vs. Quantity Demanded, moving from (Q1,P1) to (Q2,P2)
  2. QD=f(p)
  3. Quantity Demanded is a function of Price. That is if the price changes, Quantity Demanded will change. Only one factor influences Quantity Demanded.
    Moves along the Demand Curve. Does not shift demand curve.
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3
Q

Change in Supply

A
  1. Supply will change if there is a change in the determinants of supply (influences on selling plans) other things equal.
  2. Increase in Supply: Curves shifts to right.
    Decrease in Supply: Curve shifts to left
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4
Q

Changes in Demand Curve

A
  1. Demand will change if there is a change in the determinants of demand (influences on buying plans) other things equal (Ceteris Paribus)
  2. Demand curve will shift to the right if demand increases.
  3. Demand curve will shift to the left if demand increases.
    Five factors of demand. If one changes, it will shift the demand curve.
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5
Q

Changes in Demand:

A
  1. Demand can increase or decrease depending on the five factors.
  2. Shifts the demand curve.
  3. Demand Increase in curve goes Right.
    Demand Decrease in curve goes left.
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6
Q

Consumer Expectations

A
  1. Rise in the expected future price of a good increases the current demand for that good.
  2. How the expectations affect demand today, in the future.
    (e. g. want to buy a house, focus on housing price goes up. If rational consumer, wants to buy now, if not you will buy more expensive in the future. Housing will go up, demand in the future will go up.)
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7
Q

Decrease in Demand

A
  1. Original EQ: (Q1,P1)
  2. New EQ: (Q2, P2)
  3. Decrease in demand, lowers the price and quantity.
    Initial effect of a decrease in demand is a surplus.
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8
Q

Decrease in Supply

A
  1. Original EQ: (Q1,P1)
  2. New EQ: (Q2, P2)
  3. Decrease in supply, decreases quantity and and increase price.
    Initial effect of a decrease in supply is a shortage.
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9
Q

Demand (Curve)

A
  1. Relationship between various prices and quantities demanded.
    Demand schedule/curve show the relationship between the price of a product and the quantity demanded.
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10
Q

Demand and Supply Summary

A
  1. Quantity demanded amount a buyer is able to buy at a given price
  2. Demand: Various prices and various quanittites demand
  3. Law of Supply. Relationship between price and quantity demanded. Price goes down, quantity demanded goes up.
  4. Demand Determinants / Influences on Buying Plans is based on Income, price of related goods, consumer expectations, taste or preferences, number of buyers
  5. Quantity Supplied DNE Supply. Quantity suppllied is a seller is willing and able to sell at a given price. Supply is the schedule that shows the prices and quantities supplied
  6. Law of supplied if price goes up, quantity goes up. (Direct Relationship)
  7. Supply Determinants / Influences on Selling Plans (Factors): Input/resources crisis, price of other goods, producer expectations, technology, number of sellers.
  8. Demand, Supply and market equilibrium: When demand and supply change, this will change the demand and supply curve, and the market equilibrium. When demand increases, it will shift demand curve to the right. If demand decreases, goes left. Supply increases goes right, Supply decreases goes left.
  9. Shortage and Surplus: When the market is not in equilibrium. Shortage: greater quantity than quantity supply. Surplus: Greater supply than quantity supplied
    Changes in demand and supply, will shift demand and supply. This will change the market equilibrium and the market price, and quantity.
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11
Q

Determinants of Supply (Influences on Selling Plans)

A
  1. Input prices (resources prices)
  2. Prices of Other Goods
  3. Producer Expectations (Supply Side)
  4. Technology
    Number of Sellers
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12
Q

Determinates of Demand (Influences on Buying Plans)

A
  1. Income
  2. Price of Related Goods (Substitute and Complementary goods)
  3. Consumer Expectations
  4. Tastes/Preferences
    Number of Buyers
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13
Q

Income

A

Two types of goods: Normal Goods and inferior Goods

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14
Q

Increase in Demand and Market Equilibrium

A
  1. Original EQ Price: (Q1,P1).
  2. New EQ Price: (Q2, P2)
  3. Increase in demand will increase price and quantity.
    Initial effect of an increase in demand is a shortage.
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15
Q

Increase in Supply

A
  1. Original EQ: (Q1,P1)
  2. New EQ: (Q2, P2)
  3. Increase in supply, increases quantity and decreases price.
    Initial effect of an increase in supply is a surplus
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16
Q

Inferior Goods

A
  1. As income rises, the demand for an inferior good will go down.
  2. Result: demand curve for inferior good shifts to the left as income increases.
  3. Inferior Goods: Spam, expired products, Ramen noodles
    As income rises, one wants to consume healthier foods
17
Q

Input Prices (Resource Prices)

A
  1. Higher input prices imply higher costs and lower supply (e.g. PEDs Virus, Utlities)
    The higher input price, the higher cost, lower supply. It will cost you more to produce the widget given the same amount of money to produce, producing fewer units, decreasing supply.
18
Q

Law of Demand

A
  1. Relationship between Price and quantity demand.
  2. Other things equal, price falls, quantity demanded rises. Inverted relationship.
  3. Price and Quantity demanded move in opposite directions.
  4. The law of demand tells you the price between price and quantity demanded, not price and demand.
    To determine Law of Demand, the Demand Curve, is Price vs. Quantity Demanded.
19
Q

Market Equilibrium

A
  1. Change in Demand: Goes Down. Shift demand curve to the left (decrease) or the right (increase)
  2. Change in Supply: Goes Up. Shift demand curve to the left (decrease) or the right (increase)
    Any change in Demand or supply will change the market equilibrium.
20
Q

Normal Goods

A
  1. Income increases, demand for normal good will go up.
  2. If demand increases, it will shift demand curve to the right as income increases.
    (e. g. old car is trade in for new car. Small house to bigger house.)
21
Q

Number of Buyers

A
  1. Number of buyers increase, demand will increase

Demand Curve will Shift to the Right.

22
Q

Number of Sellers

A

Increase in number of sellers, will increase supply, shift supply curve to the right.

23
Q

Price of related Goods: Complementary

A
  1. E.g. Hot Dogs and Hot dog buns, bread and butter, computer and software.
  2. An increase in the price of the one product decreases the demand for another good.
  3. Dodger Dog Issue: If the price of hot dogs increases, the demand will decrease, buy less buns.
    Move in the opposite direction.
24
Q

Price of Related Goods: Substitute

A
  1. Substitute goods (e.g. Pens, Pencils. Shoes vs. Boots, Medication brand vs. generic)
  2. An increase in the price of one product increases the demand for another product. (e.g. increase in coke?s price, will increase demand for Pepsi).
    Same Direction.
25
Q

Prices of Other Goods

A
  1. Substitution in production.
  2. Move in opposite Direction.
  3. Example: Producer of Pants and Shirts. If price of pants go up, as producer would increase pants production and decrease shirt production. (The supply of shirts will go down.)
    Example: footballs and Basketball: If football goes down, producer will produce fewer footballs, and more basketballs.
26
Q

Producer Expectations

A
  1. A rise in the expected future price of a good increases the supply of the good in the future and lowers the supply today.
  2. Expect future product will go up, you will hold off on selling your product today. Want to sell product in the future.
  3. Supply of product will go down for today. But will go up in the future.
  4. Example: Stock Market: The price may go up, won?t sell stocks today; will sell in the future.
    Expected Future Price (Increase): Supply (Today) Decrease.
27
Q

Quantity Demanded

A
  1. Amount a buyer/consumer is willing and able to purchase at a given price.
  2. Quantity demanded and Demand are not the same thing.
    Quantity demanded is a particular point on the demand curve.
28
Q

Quantity Supplied

A
  1. The amount that the seller is willing and able to sell at a given price.
  2. Quantity Supplied is a function of Price. QS=F(p)
  3. Only one factor influnces quantitied supplied on the graph.
  4. It does not impact Supply.
    Price increases, quantity supplied increases.
29
Q

Supply (law of)

A
  1. The supply schedule and supply curve show the relationship between the price of a product and the quantity supplied.
  2. Price and quantitiy supplied move in the same direction
  3. Other things equal, as price increases, the quantity supplied increases.
    It does not tell you the relationship between Price and supply.
30
Q

Supply Decrease, Demand Decreases

A

Price Decreases, Quantity can?t be determined.

31
Q

Supply Decrease, Demand Increase

A

Price Increase, Quantity can?t be determined.

32
Q

Supply increase, Demand Decrease

A

Unknown Price, Decrease Quantity

33
Q

Supply Increase, Demand Increase

A

Unknown Price, Increase Quantity

34
Q

Tastes/Preferences

A
  1. If we change our tastes, then demand will always change.

2. E.g. Purchase Cell phones, because lan lines suck. DL music instead of buying CDs.

35
Q

Technology

A
  1. Technology improves productivity and increases supply

Better tech more products, in a given amount of time, can improve product quality.

T2.Demand and Supply (1 decks)

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