Unit 3; Supply and Demand Flashcards
Law of Demand
When price increases, quantity demanded decreases
When price decreases, quantity demanded increases
Law of Supply
When price increases, quantity demanded increases
When price decreases, quanitity demanded decreases
Normal Good
As income increase, demand for these goods also increases
Inferior Good
As income increases, demand for these goods decreases
Substitutes
Products that can easily replace another product
Complements
Products that are used in conjunction with another product
Elasticity
Measures how responsive one economic variable is to changes in another
Inputs
Factors of production that producers must pay to make their good or service
Subsidies
When the government gives money directly to a business so that they can function
Excise Taxes
A tax on a specific good
Market Equilibrium
The price at which buyers and sellers agree because quantity supplied equals quantity demanded
Shortage
If the price is too low, as the product sells out quickly and sellers could have raised the price and made more money
Surplus
If the price is too high, as the product doesn’t sell very well and too much product stays on the shelves, not making money for the seller
Price Ceiling
Maximum price for a good or service in a specific market
What happens to the supply and demand curves when the price changes?
When prices change, the supply and demand also change.
What happens to the supply and demand curves when there is a change in supply or a change in demand?
When there is a change in supply or demand, the other changes, as well as price.
What factors can cause a change in demand?
Some factors that was cause a change in demand are price, consumer income, price of related goods, consumer tastes, consumer expectations, and number of buyers.
What are two examples that might cause the demand curve to shift to the left?
Increase in price, consumer income
What are two examples that might cause the demand curve to shift to the right?
Decrease in price, number of buyers
What factors cause a change in supply?
Cost of inputs, natural disasters
What are two examples that might cause the supply curve to shift to the left?
Higher cost of inputs, less sellers
What are two examples that might cause the supply curve to shift to the right?
More sellers, lower cost of inputs
What are two examples that might cause the supply curve to shift to the left?
Less sellers, natural disasters
What happens to the demand for normal goods when the economy is doing well?
Demand for normal goods go up
What happens to the demand for normal goods when the economy is doing poorly?
Demand for normal goods goes down
If the price of steek used in car production decreased, what would happen to the supply and demand curve for cars?
The supply would go up and the demand would go down
The price for snorkeling gear increases. If snorkeling gear and swimsuits are complements, when happens to the market for swimsuits?
The price of swimsuits goes up, the supply goes up, and the demand goes down.
If the government announces today that a tax increase of 25 cents on a can of soda is to take place in a month, what would you expect to happen to happen today to the current market for soda?
Either nothing or demand would go up due to people stocking up on sodas.
Who generally benefits from price floors?
Sellers
What is an example of a price floor?
Minimum wage
Who generally benefits from price ceilings?
Buyers
What is an example of a price ceiling?
Rent control
