Economics Unit 2

what is Law of Supply

Where producers will offer more at higher prices, and less at lower prices

Are there more factors that have an impact on change in demand or change in quantity demanded?

A change in demand has more factors since △ D is a whole new curve because of one of the five things.

What is the effect of a change in price on quantity demanded?

A small change in price leads to a large change in the quantity demanded. A large change in price leads to a small change in the quantity demanded

What is the relationship between the price of an item and the quantity demanded?

As the price of a good increases, the quantity demanded of the good decreases As the price of a good decreases, the quantity demanded of the good increases.

explain why some goods have elastic demand and some goods have inelastic demand?

Elastic: products that exist in a competitive marketplace have elastic demand. This is because a competitive marketplace offers more options for the buyer Inelastic: Goods that can only be produced by one supplier generally have inelastic demand

What factors determine a product's demand elasticity?

If it is a necessity. Elastic is not a necessity and Inelastic is. Substitutions. No substitutions for inelastic demand Expensive. Elastic is usually expensive and Inelastic is relatively inexpensive

How does price affect a seller's decision to produce a product?

If the price consumers are willing to pay for a product is high, producers will produce more of that product.

explain why the government imposes price floors and price ceilings in certain markets.

Price ceilings are used to try and keep prices low for those who demand the product. But when the market price is not allowed to rise to the equilibrium level, quantity demanded exceeds quantity supplied, and a shortage occurs.

how are the terms rationing and price are related

Rationing allocates goods and services without the use of prices

explain why the price system is an efficient allocation of economic goods

Resources are allocated more efficiently because prices allow consumers and producers to place a value on the goods and services. Resources will go to the uses that are most highly valued by consumers

describe an example of a surplus and an example of a shortage, including what may have caused them

Surplus: when you cook a meal, if you have food remaining after everyone has eaten Shortage: when you cook a meal, and there isn't enough to feed the entire family. Both are dependent on quantity demanded and quantity supplied.

Why do supply and demand curves slope in opposite directions?

This is due to contrasting objectives: while the buyer is concerned with buying the good at least possible price, the supplier is concerned with selling their goods at maximum price. While buyers want to minimize their expenditures, suppliers want to maximize their revenues.

How do changes in supply and demand affect prices?

When demand for a product decreases, the price decreases. When supply of a product increases, the price decreases.

How do complements affect demand?

When the price of a good that complements a good decreases, then the quantity demanded of one increases and the demand for the other increases

How is the equilibrium price of a product related to the equilibrium quantity, and how can these values be determined?

When the quantity supplied for a product is equal to the quantity demanded for the product, that quantity is the equilibrium quantity. So when supply of a product increases, the price decreases.

explain how prices affect demand

as prices increase, the consumer demand quantity decreases. When prices decreases, the consumer demand quantity increases

What factors, excluding price, affect demand?

complementary goods, △ seasons /weather, △ income △Tastes/ Styles

What might happen to make a producer decrease his or her supply of a product?

producers would offer fewer products for sale at all possible prices. Then the supply curve would shift to the left