Ch. 3 Econ

Five principal factors that shift the supply curve

1. Changes in input prices 2. Changes in the prices of related goods and services 3. Changes in technology 4. Changes in expectations 5. Changes in the number of PRODUCERS

What is an equilibrium?

Price has reached the level where quantity supplied equals quantity demanded A competitive market is in equilibrium when the price has moved to a level at which quantity demanded equals quantity supplied. Markets move toward equilibrium- the market price always moves toward the equilibrium price, the price at which there is neither surplus nor shortage

Movement along the demand curve vs. shift of the demand curve

The rise in quantity demanded when going from point A to point B reflects a movement along the demand curve: it is a result of a fall in the price of a good (change in price). The rise in quantity demanded when going from point A to point C reflects a shift of the demand curve: it is the result of a rise in the quantity demanded at any given price

Five principal factors that shift the demand curve

1. Changes in the prices of related goods or services 2. Changes in income 3. Changes in tastes 4. Changes in expectations 5. Changes in the number of CONSUMERS

Shifts of the demand curve vs movement along the demand curve

A shift of the demand curve- is a change in the quantity demanded at any given price. (left shift= decrease in quantity demanded) (right shift= increase in quantity demanded) A movement along the demand curve- is a change in the quantity demanded of a good arising from a change in price.

Shifts and Movements along the Supply Curve

A shift of the supply curve- is a change in the quantity supplied at any given price. A movement along the supply curve- is a change in the quantity supplied of a good arising from a change in price.

SHIFTS of the demand curve

When economists talk about an INCREASE in demand, they mean a RIGHTWARD shift of the demand curve: at any given price, consumers demand a larger quantity of the good or service than before When economists talk about a DECREASE in demand, they mean a LEFTWARD shift of the demand curve: at any given price, consumers demand a smaller quantity of the food or service than before