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cct219: Media Economics I > Week 3: demand and supply continued; elasticity > Flashcards

Week 3: demand and supply continued; elasticity Flashcards

1
Q

Demand

A

• the relationship between a product’s price and quantity demanded
• shown using a schedule or curve

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2
Q

Law of demand

A

• states that price and quantity demanded are inversely related

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2
Q

Market demand

A

the sum of quantities demanded by all consumers in a market

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3
Q

Changes in Demand

A

• are shown by shifts in the demand curve
• are caused by changes in demand factors

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4
Q

5 Demand Factors

A

• Number of buyers
• Income
• Prices of other products
• Consumer preferences
• Consumer expectations

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5
Q

Number of buyers

A

• increase causes a rightward shift in demand
• caused by pop growth or more people wanting to buy it

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6
Q

Income

A

• normal products
• inferior products

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7
Q

Normal products

A

products that consumers demand more of as income increases

ex. expensive steak

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8
Q

Inferior products

A

products that consumers demand less of as income decreases

ex. McDonalds

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9
Q

Prices of other products

A

• substitutable products
• complementary products

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10
Q

Substitutable products

A

• products that can be consumed in place of one another
• rise in another product’s price causes a rightward shift in demand

ex. butter and margarine

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11
Q

Complementary products

A

• products that are consumed together
• rise in another product’s price causes a leftward shift in demand

ex. milk and cereal

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12
Q

Consumer preferences

A

• trends
• marketing

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13
Q

Consumer expectations

A

ex. if most consumers expect the price of laptop computers to fall, the current demand for laptops decreases

ex. if they expect their standard of living to rise—their current demand for normal products will increase, and their current demand for inferior products will decrease

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14
Q

Quantity Demanded

A

the amount of a product consumers are willing to purchase at each price

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15
Q

Changes in Quantity Demanded

A

• movements of points along the demand curve
• only change bc of price (y-axis)

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16
Q

Supply

A

• the relationship between a product’s price and quantity supplied
• shown using a schedule or curve

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17
Q

Law of supply

A

states that there is a direct relationship between price and quantity supplied

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18
Q

Changes in Supply

A

• are shown by shifts in the supply curve
• are caused by changes in supply factors

19
Q

6 Supply Factors

A

• Number of producers
• Resource prices
• State of technology
• Prices of related products
• Changes in nature
• Producer expectations

20
Q

Number of producers

A

an increase causes a rightward shift in supply

21
Q

Resource prices

A

an increase causes a leftward shift in supply

21
Q

State of technology

A

an improvement causes a rightward shift in supply

22
Q

Prices of related products

A

an increase in the price of a related product causes a leftward shift in supply

23
Q

Changes in nature

A

for some products, an improvement causes a rightward shift in supply

24
Q

Producer expectations

A

an expectation of lower prices in the future causes an immediate rightward shift in supply

25
Q

Quantity Supplied

A

the amount of a product businesses are willing to supply at each price

26
Q

Changes in Quantity Supplied

A

• are shown by movements along the supply curve
• are caused by price changes

27
Q

Law of Supply and Demand

A

• where both curves intersect
• customers happy with price and firms are happy to produce that product at that low price
• surplus
• shortage

28
Q

Surplus

A

• too much supply
• price is pushed down

29
Q

Shortage

A

• too much demand
• price is pushed up

30
Q

Equilibrium

A

point at which demand and supply curves intersect

31
Q

Price elasticity of demand

A

shows how responsive consumers are to changes in price

32
Q

elastic demand

A

means that the % change in quantity demanded is more than the % change in price

ex. coffee

33
Q

inelastic demand

A

means that the % change in quantity demanded is less than the % change in price

ex. insulin for diabetics

34
Q

unit-elastic demand

A

• means that the % change in quantity demand equals the % change in price
• they equal each other

35
Q

Perfectly elastic demand

A

means that there is a constant price and a horizontal demand curve (perfect competition)

36
Q

Perfectly inelastic demand

A

means that there is a constant quantity demanded and a vertical demand curve

37
Q

4 determinants of price elasticity of demand

A

• portion of consumer incomes
• access to substitutes
• necessities versus luxuries
• time

38
Q

portion of consumer incomes

A

products with smaller portions more inelastic

39
Q

access to substitutes

A

products with more substitutes more elastic

40
Q

necessities versus luxuries

A

more inelastic for necessities and more elastic for luxuries

41
Q

time

A

more elastic with the passage of time

42
Q

> 0 to < 1

A

inelastic demand

43
Q

1

A

unitary elasticity

44
Q

> 1

A

elastic demand

cct219: Media Economics I (12 decks)

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