Chapter 4 Supply And Demand Flashcards Preview

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Flashcards in Chapter 4 Supply And Demand Deck (25)
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1
Q

How is the value a goods determined.

A

By the interaction of supply and demand

2
Q

Demand

A

Is the quantity of goods that consumers are willing and able to buy at a given price.
We expect an inverse relationship between quantity demand and price.

3
Q

Demand is shifted by

A

Changes in the prices of other goods, income, number of consumers and taste. Other goods include complements and substitutes.

4
Q

Supply

A

Is the quantity of goods that producers are willing and able to sell at a given price.
We expect a direct relationship between quantity supplied and price.

5
Q

Supply is shifted by

A

Changes in cost of production, alternative use of resources, number of sellers and technology

6
Q

Both supply and demand increase by

A

Shifting right wards

7
Q

Both demand and supply decrease by

A

Shifting leftwards

8
Q

Equilibrium

A

The point where supply and demand cross.

9
Q

A price higher than the equilibrium price creates a

A

Surplus of goods.

10
Q

A price below the equilibrium price

A

Creates a shortage

11
Q

How do markets control price

A

Through price ceilings or floors.
These may leave a market in disequilibrium .
If they are effective, they are said to be binding.

12
Q

Revenue

A

Equals price times quantity sold

13
Q

How can any supply and demand problem be solved?

A

Determine which of supply and demand is affected.
Determine if it will increase or decrease.
Determine what happens to equilibrium price and quantity and interpret the outcome.

14
Q

Law of demand

A

-States that there should be an inverse relationship between price and on quantity demanded of any good.
When the price of a good rises , The law of demand says that the quantity demanded of that good should fall and vice versa

15
Q

Law of supply

A

-States that there should be a direct relationship between price and the quantity supplied of any good.
When the price of a good rises, the law of supply says that the quantity supplied of that good should rise and vice versa.

16
Q

Quantity demanded

A

-The amount of a good or service that consumers are willing and able to buy at a specific price

17
Q

Quantity supplied

A

-The amount of a good or service that producers are willing and able to offer for sale at a specific price

18
Q

Substitute

A

-Goods that are alternatives to each other. eg coffee and tea

They are purchased instead of each other.

You buy one OR the other

19
Q

Complement

A

-Goods that are consumed together. eg coffee and muffin

They are purchased together with each other

You buy BOTH together

20
Q

Taste

A

-reflect the likes and dislikes of consumers at the moment.

21
Q

Equilibrium

A

-Is a position where either no forces are acting on a system or equally balanced forces are acting

22
Q

Disequilibrium

A

disequilibrium occurs when..

it occurs when quantity SUPPLIED is not equal to quantity DEMANDED

23
Q

Price ceiling

A

-keeps the price from getting higher; maximum; causes a shortage; below the equilibrium

24
Q

Price floor

A

-keeps the price from going lower; minimum; causes a surplus; above the equilibrium

25
Q

Binding

A

-affecting the market