Unit 2 Flashcards
What is demand?
How much people want to buy something
What are the POINTS of demand?
- Price
- Income
- Information
- Price of other goods
What is price (points of demand)?
When something costs more, people tend to buy less of it. This is called the law of demand
What is income (points of demand)?
How much money you have affects what you can buy
What is information (points of demand)? What is an example of this?
What we know can change what we buy.
EXAMPLE: Shortage of toilet paper during COVID. Sudden increase in demand for it led to shortages and price changes.
What is price of other goods (points of demand)? What are examples of both?
Complement - Things people typically buy together. If the price goes up of one good, we might buy less of both.
EXAMPLE: If movie tickets prices go up, people might buy less popcorn.
Substitute - Goods that are often purchased instead of
another, typically in response to price changes.
EXAMPLE: If hot dog bun prices go up, people might buy burgers instead.
What are the two main ways to represent demand?
Graphical representation and algebraic representation
Where does price and quantity go on the axis of a demand curve?
Price is always on the y-axis and quantity is always on the x-axis
Demand always shifts to the…
Right
When the price goes ↑
People buy less
When the price goes ↓
People buy more
What happens when quantity supplied = quantity demanded?
We get equilibrium price of a product
What are the four market behaviours?
- Supply can INCREASE
- Supply can DECREASE
- Demand can INCREASE
- Demand can DECREASE
What is this equation [ Qd(P) = 500 - P ] an example of?
Algebraic representation of DEMAND
What is elasticity?
Measures how much quantity demanded changes in response to a change in price
What are examples of highly elastic goods, that are very sensitive to price changes?
Luxury items like designer clothing or non-essential items like vacation trips
What are examples of inelastic goods, that are less sensitive to price changes?
Essential items like food, gasoline or goods and services like electricity or medical services
What is a graphical approach?
Graphical approach in economics means using charts and graphs to show economic ideas visually, making them easier to understand
If the demand curve is very steep…
It means there is a small change in price that leads to a big change in how much people want to buy
What is supply?
How much of a product or service is available in the market for consumers to purchase
What are the three main inputs that affect quantity supplied?
- Price
- Cost
- Government Interventions
What is price (three main inputs that affect quantity supplied)?
When the price of a product goes up, more suppliers are willing to produce and sell it because they can make more money
What is cost (three main inputs that affect quantity supplied)?
All about how much is costs to make something
What is government interventions (three main inputs that affect quantity supplied)?
Government can affect how much of something is available by setting rules
