Week 02: demand and supply Flashcards
Non-price determinants of demand and supply
How does number of buyers in th market cause a shift in the demand curve?
Fewer buyers= lower demand
More buyers= Higher demand
How does taste and prederences cause a shift in the demand curve?
Favoruable changes= Higher demand
Unfavoruable changes= lower demand
Ex: A shift to greener and healthier habits, will cause an increase in demand for healtheier products like organic food, as there is more buyers in the market.
How does expectations of buyers cause a shift in the demand curve?
If buyers expect (in the future) price to rise, or demand to full= Higher demand now
If buyers expect prices to fall or supply to increase= Lower demand now
How does income cause a shift in the demand good
explore in terms of nromal and inferior goods
Normal good= When income increases, demand increase and vice versa (normal r/s)
Inferior good= When income increases, demand decreases and vice versa (Inverse r/s)
Related goods
How do subsitute or complementary goods cause a shift in the demand curve?
Subsitute goods (coke and pepsi)= When the price rises for good A, the dmeand for good B rises and vice versa. [Direct relationship]
Complementary goods (car and Petrol) = When the price of Good B increases, this causes the demand for Good A to decrease. [Inverse relationship]
If the prices of petrol increases, than the demand for cars decreases.
Non-price determinats of supply
How does number of sellers cause a shift in the supply curve?
More sellers= Higher supply
Fewer sellers= Lower supply
How does newer technology cause a shift in the supply curve?
newer tech= decreases production costs, which leads to higher supply.
How does expectations of producers cause a shift in the supply curve?
If producers expect the prices to drop in the future= Lower suppply now
If producers expect the prices to rise in the future=
Higher supply now
How do resource prices cause a shift in the supply curve?
Lower resource price= Higher supply
Higher resource prices= Lower supply
How do taxes and subsidies cause a shift in the supply curve?
Taxes= Increases the cost of production= Supply will fall/decrease
Subsidies= Lowers the cost of production= Supply will increase
How do prices of other goods in the firms cause a shift in the supply curve?
An increase in the price of good B= Firm will dedicate more resources to good B than A.
