Week 4: Supply and Demand

Question 1

Market

Answer 1

A place where buyers and sellers come together, physically or digitally. The supply and demand determine price.

Question 1

Economic models give us insight into why:

Answer 1

• Price changes
• Consumers demand the amount they do
• Producers supply the amount they do

Question 2

Some examples of what supply and demand can help us understand:

Answer 2

• Price of commodities
• Value of currencies
• Interest dates on debt

Question 3

Demand:

Answer 3

amounts of a good or service buyers are willing and able to purchase at various possible prices

Question 4

Quantity demand (Qd)

Answer 4

: number of units demanded of a specific good or service at a particular market price.

Question 5

What’s the difference between demand and demand quantity?

Answer 5

Demand is general, whereas you cannot discuss quantity demand without the price.

Example:
Demand: There is high demand for biker boots this fall.
Quantity demanded: When the price of biker boots is 40 the quantity demanded is high.

Question 6

Demand schedule

Answer 6

is a table that tells us the quantity demand at difference price ranges.

Question 7

Demand curve

Answer 7

a graph showing how the demand for a commodity or service varies with changes in its price

Price is on the Y axis ( the left) and quantity is on the X axis (bottom).

Question 8

Law of demand

Answer 8

As the price of a good rises the quantity demand falls.

Question 9

Individual demand

Answer 9

is the quantity of goods/services that a single consumer is willing and able to purchase at a given price. Draw a daw based on just my opinions.

Question 10

Market demand

Answer 10

is the quantity of goods/services that ALL consumers in the market are willing and able to purchase at a given price. Look at the whole market. You can combine individual demand curves to get this.

Question 11

Change in demand

Answer 11

shift of entire demand curve in response to something changing other than price.

Question 12

What causes an INCREASE in demand:

Answer 12

 More demanders (more young people move to a location)
 More income
 Changing tastes and preferences
 Expect future prices to rise.
 Related goods (a substitutes price rises)
 Price of complements fall

Question 13

Substitutes

Answer 13

Can use in replace of a product

Question 14

Complements

Answer 14

An item you buy with a product (burger buns and burger patties)

Question 15

What causes a DECREASE in demand:

Answer 15

 Less demanders
 Less income
 Changing tastes and preferences
 Expect future prices to fall.
 Related goods (a substitutes price fall)
 Price of complements rise

Question 16

Rules:

Answer 16

1. When the price of the product changes, quantity demanded changes.
2. When anything else changes, demand curve shifts.

Question 17

Supply

Answer 17

amount of good or service that will be offered for sale at different possible prices. (General term that doesn’t include exact price)

Question 18

Quantity supplied

Answer 18

the number of units supplied of a specific good or service at a particular market price. (Specific term that pinpoints price)

Question 19

Supply schedule

Answer 19

A table that show the quantity supplied at the price

Question 20

Supply curve

Answer 20

A graph that shows how a change in the price of a good or service affects the quantity a seller supplies

Question 21

Law of Supply

Answer 21

As price increases quality supplied increases. If price falls quantity supplied falls.

Question 22

Change in supply

Answer 22

shift on entire supply curve in response to something changing other than price.

Question 23

What might increase the supply:

Answer 23

• Increase the number of sellers/suppliers
• Decrease cost of production
• Cheaper Input prices
• Expectations of future prices to fall
• The price of related goods drop

Question 24

Input prices

Answer 24

costs that are involved in producing a good

Question 25

Firm supply curve

Answer 25

Looking at one firms supply curve only

Question 26

Market supply curve

Answer 26

Looking at all the firms in a particular markets supply curve

Question 27

Equilibrium

Answer 27

A state in the economy where supply and demand are balanced.

Question 28

How long does It takes markets to reach equilibrium in reality?

Answer 28

• Depends on characteristics of market or market structure
• If competitive, transparent, maybe not long
• If power asymmetries and opaqueness, then long time or never

Question 29

SUMMARY

Answer 29

1. Seller / suppliers / producers would like to sell or supply more at higher prices
2. Buyers / demanders / consumers would like to demand or buy more at LOWER prices
3. The price at which an item is supplied equals the amount demand is called equilibrium.