ECON Chapter 4: Demand and supply
A supply schedule is a list of the ______ at each different price when all other influences on selling plans remain the same. A supply curve is a graph of _____ . A. quantities supplied; a supply schedule B. quantities actually sold; a supply schedule C. quantities supplied; quantities supplied D. quantities actually sold; quantities supplied
A
How does Productivity effect the supply curve
An increase in productivity lowers the cost of producing the good and increases its supply. A decrease in productivity has the opposite effect and decreases supply Technological change and the increased use of capital increase productivity. EX: advances in electronic technology have lowered the cost of producing a computer and increased the supply of computers. Technological change brings new goods such as the iPhone 6, the supply of which was previously zero. Natural events such as severe weather and earthquakes decrease productivity and decrease supply. EX: the four-year drought in California decreased the supply of agricultural products including nuts, fruits, and vegetables in 2015.
Buyers, on the demand side of a market
Like a low price, and the lower the price the greater is the quantity they plan to buy. This effect of price on buying plans is the law of demand.
In the market for smartphones, which of the following events increases the supply of smartphones? A. An increase in people's incomes B. A rise in the price of an e-book reader (a substitute in production) C. New technology that lowers the cost of making a smartphone D. A rise in the wage rate paid to electronics workers
C New technology that lowers the cost of making a smartphone increases productivity, which is output per unit of input. An increase in productivity lowers the cost of producing a smartphone and increases supply. Next Question
Which of the following events illustrates the law of demand: Other things remaining the same, a rise in the price of a good will ______. A. decrease the demand for the good B. increase the demand for a substitute of that good C. decrease the quantity demanded of that good D. increase the demand for a complement of that good
C The law of demand states Other things remaining the same, if the price of a good rises, the quantity demanded of that good decreases; and if the price of a good falls, the quantity demanded of that good increases.
A demand schedule is a list of the ______ at each different price when all other influences on buying plans remain the same. A demand curve is a graph of _____ . A. shortages; price rises B. surpluses; price falls C. quantities actually bought; quantities demanded D. quantities demanded; a demand schedule
D
market equilibrium
Occurs when there is neither a surplus nor a shortage When quantity demanded=quantity supplied. In this situation, the price is the equilibrium price, and the quantity bought and sold is the equilibrium quantity.
Decrease in Supply
Supply decreases and the supply curve shifts leftward if -The price of a substitute in production rises. -The price of a complement in production falls. -A resource price or other input price rises. -The price of the good is expected to rise. -The number of sellers decreases. -Productivity decreases.
Increase in Supply
Supply increases and the supply curve shifts rightward if -The price of a substitute in production falls. -The price of a complement in production rises. -A resource price or other input price falls. -The price of the good is expected to fall. -The number of sellers increases. -Productivity increases.
How does the Number of Buyers shift the demand curve?
The greater the number of buyers in a market, the larger is demand. Ex: the demand for parking spaces, movies, bottled water, or just about anything is greater in New York City than it is in Boise, Idaho.
Decrease in quantity supplied
The quantity supplied decreases and there is a movement down along the supply curve if the price of the good falls and other things remain the same.
Increase in the quantity supplied
The quantity supplied increases and there is a movement up along the supply curve S0 if the price of the good rises and other things remain the same.
How does a Substitute shift the demand curve?
a good that can be used in place of another good Ex: Chocolate cake is a substitute for cheesecake. The demand for a good and the price of one of its substitutes move in the same direction. The demand for a good increases if the price of one of its substitutes rises and decreases if the price of one of its substitutes falls. For example, the demand for cheesecake increases when the price of chocolate cake rises.
Too high of a price brings
a surplus When there is a surplus, the price falls
Changes in Demand (is not influenced by price)
is a change in the quantity that people plan to buy when any influence on buying plans changes other that the price of the good, there is a change in demand. which means that there is a new demand schedule and new demand curve. (The demand curve shifts.) When demand decreases, the demand curve shifts leftward, the quantity demanded at each price is smaller When demand increases, the demand curve shifts rightward, the quantity demanded at each price is greater. (The demand curve shifts.)
Law of Demand
states other things remaining the same, if the price of a good rises, the quantity demanded of that good decreases; and if the price of a good falls, the quantity demanded of that good increases. Ex: when all other things remain the same, if the price of an iPhone falls, people will buy more iPhones; or if the price of a baseball ticket rises, people will buy fewer baseball tickets.
How does Expected Future Prices shift the demand curve?
A rise in the expected future price of a good increases the current demand for that good and a fall in the expected future price decreases current demand. Ex: If you expect the price of noodles to rise next week, you buy a big enough stockpile to get you through the next few weeks. Your demand for noodles today has increased. If you expect the price of noodles to fall next week, you buy none now and plan to buy next week. Your demand for noodles today has decreased.
Too low of a price brings
A shortage When there is a shortage, the price rises- the law of market forces.
Both Demand and Supply Change in Opposite Directions
(1) A decrease in demand shifts the demand curve leftward to D1 and an increase in supply shifts the supply curve rightward to S1. (2) The price falls, but (3) the quantity might increase or decrease. (1) An increase in demand shifts the demand curve rightward to D1 and a decrease in supply shifts the supply curve leftward to S1. (2) The price rises, but (3) the quantity might increase or decrease.
The Effects of Change in Both Demand and Supply in the Same Direction
(1) An increase in demand shifts the demand curve rightward to D1 and an increase in supply shifts the supply curve rightward to S1. (2) The price might rise or fall, but (3) the quantity increases. (1) A decrease in demand shifts the demand curve leftward to D1 and a decrease in supply shifts the supply curve leftward to S1. (2) The price might rise or fall, but (3) the quantity decreases.
4.1 Distinguish between quantity demanded and demand, and explain what determines demand.
-Other things remaining the same, the quantity demanded increases as the price falls and decreases as the price rises—the law of demand. -The demand for a good is influenced by the prices of related goods, expected future prices, income, expected future income and credit, the number of buyers, and preferences. A change in any of these influences changes the demand for the good.
4.2 Distinguish between quantity supplied and supply, and explain what determines supply.
-Other things remaining the same, the quantity supplied increases as the price rises and decreases as the price falls—the law of supply. -The supply of a good is influenced by the prices of related goods, prices of resources and other inputs, expected future prices, the number of sellers, and productivity. A change in any of these influences changes the supply of the good.
The main influences on buying plans that change demand are
-Prices of related goods -Expected future prices -Income Expected future income and credit -Number of buyers -Preferences
The main influences on selling plans that change supply are
-Prices of related goods -Prices of resources and other inputs -Expected future prices -Number of sellers -Productivity
Change in Quantity Supplied (ALONG Sc) Versus Change in Supply (SHIFTS Sc)
-When the PRICE of the good CHANGES and all other influences on selling plans remain the same, we say there has been a CHANGE IN QUANTITY SUPPLIED. EX: If the PRICE of bottled water FALLS, the quantity supplied of bottled water decreases and there is a movement DOWN along the supply curve. If the PRICE RISES the quantity supplied increases and there is a movement UP along the supply curve -the influences on sellers' plans EXCEPT THR PRICE OF THE GOOD bring a CHANGE IN SUPPLY. EX: If any influence on water bottlers' plans other than the price of bottled water changes, there is a change in the supply of bottled water. When the supply of bottled water decreases, the supply curve shifts leftward When the supply of bottled water increases, the supply curve shifts rightward
Which of the following statements is about a normal good, which is about an inferior good, which is about both, and which is about neither? I With incomes falling in the recession, people are buying more chicken. II People are buying more beef now that incomes have increased. III People are buying more chicken because the price of chicken has fallen. IV With higher incomes people are switching from chicken to beef. A. I is inferior, II is normal, III is neither, and IV is both B. IV is inferior, III is normal, II is neither, and I is both C. II is inferior, I is normal, III is neither, and IV is both D. III is inferior, II is normal, IV is neither, and I is both
A A normal good is one for which demand increases when income increases and demand decreases when income decreases. An inferior good is one for which demand decreases when income increases and demand increases when income decreases. So, statement I describes an inferior good, II a normal good, III neither because it doesn't describe the effect of a change in income, and IV both.
Many Americans are selling their used cars and buying new fuel-efficient hybrids. Other things remaining the same, in the market for used cars, ______ and in the market for hybrids ______. A. supply increases and the price falls; demand increases and the price rises B. both demand and supply decrease and the price might rise, fall, or not change; demand increases and the price rises C. demand decreases and the price rises; supply increases and the price falls D. demand decreases, supply increases, and the price falls; supply increases and the price falls
A Many Americans are selling their used cars. So the supply of used cars is increasing. The supply curve of used cars shifts rightward and the price of a used car falls. Many Americans are buying new fuel-efficient hybrids. So the demand for hybrids is increasing. The demand curve for hybrids shifts rightward and the price of a hybrid rises.
Which of the following statements by Tom demonstrates that his buying plans obey the law of demand? A. The only thing that's changed is the price of textbooks: they've become more expensive and now I'm not buying as many. B. I can't afford as many textbooks because my rent has increased. C. At an average price of $80 per text book, I plan to buy 5 text books per semester. D. For me, a good course website is a substitute for a textbook.
A The law of demand states: Other things remaining the same, if the price of a good rises, the quantity demanded of that good decreases; and if the price of the good falls, the quantity demanded of that good increases, and the statement, "The only thing that's changed is the price of textbooks: they've become more expensive and now I'm not buying as many" demonstrates that Tom's buying plans obey the law of demand. OK
How do Prices of Related Goods effect the supply curve?
A Change in the Price of a Substitute in Production. The supply of a good decreases if the price of one of its substitutes in production rises; and the supply of a good increases if the price of one of its substitutes in production falls. -supply of a good and the price of one of its substitutes in production move in opposite directions. EX: a clothing factory can produce chinos or button-fly jeans, so these goods are substitutes in production. When the price of button-fly jeans rises, the clothing factory switches production from chinos to button-fly jeans, so the supply of chinos decreases. A Change in the Price of a Complement in Production The supply of a good increases if the price of one of its complements in production rises; and the supply of a good decreases if the price of one of its complements in production falls. -the supply of a good and the price of one of its complements in production move in the same direction. EX: when a dairy produces skim milk, it also produces cream, so these goods are complements in production. When the price of skim milk rises, the dairy produces more skim milk, so the supply of cream increases.
Change in Quantity Demanded Vs. Change in Demand
A change in demand is when the whole curve shifts and a change in quantity demanded is movement along the demand curve due to a change in price. Price Doesn't shift the curve. A change in the quantity demanded is a change in quantity of a good that people plan to buy that results from a change in the price of the good. -Illustrated by a movement along the Demand Curve.
A substitute in production is a good that is _____ another good, and a complement in production is a good that is _____ another good. A. produced in place of; consumed with B. produced in place of; produced together with C. consumed in place of; produced together with D. produced together with; produced in place of
B
Demand is _____, when all other influences on buying plans remain the same. A. the is the quantity of a good that people want but can't afford B. the relationship between the quantity demanded of a good and the price of the good C. the quantity of a good that people plan to buy D. the relationship between the quantity demanded of a good and income
B
Other things remaining the same, a fall in the price of peanuts will ________. A. decrease the supply of peanuts B. decrease the quantity supplied of peanuts C. decrease the supply of peanut butter D. increase the supply of peanuts
B The law of supply states: Other things remaining the same, if the price of a good rises, the quantity supplied of that good increases; and if the price of a good falls, the quantity supplied of that good decreases. A fall in the price of peanuts decreases the quantity supplied of peanuts. Next Question
Aqua Springs makes the following four statements about bottled spring water. Which statement best describes the firm's quantity supplied in the bottled water market? A. We'll switch from plain water to flavored water is flavored is more profitable. B. At a price of $1 gallon, we plan to sell 2,000 gallons per day. C. If we could get a higher price, we'd bottle more water. D. We would sell more water if the demand for it were greater.
B The quantity supplied is the amount of any good, service, or resource that people are willing and able to sell during a specified period at a specified price. So when Aqua Springs says "At a price of $1 gallon, we plan to sell 2,000 gallons per day," the firm is describing a quantity supplied.
A decrease in the demand for chocolate with no change in the supply of chocolate will create a ______ of chocolate at today's price, but gradually the price will ______. A. shortage; rise B. surplus; fall C. shortage; fall D. surplus; rise
B When a decrease in the demand for chocolate occurs with no change in the supply of chocolate, the demand curve for chocolate shifts leftward. At the original price, the quantity demanded is now less than the quantity supplied and a surplus of chocolate arises. As the price falls, the quantity demanded increases and the quantity supplied decreases until the surplus is eliminated. Next Question
When floods wiped out the banana crop in Central America, the equilibrium price of bananas ______ and the equilibrium quantity of bananas ______. A. fell; decreased B. rose; decreased C. fell; increased D. rose; increased
B When floods wiped out the banana crop in Central America, the supply of bananas decreased and the supply curve of bananas shifted leftward. The equilibrium price of bananas rose and the equilibrium quantity of bananas decreased.
A substitute is a good that is _____ another good, and a complement is a good that is _____ another good. A. consumed in place of; produced with B. consumed together with; consumed in place of C. produced in place of; sold with D. consumed in place of; consumed together with
D
Which of the following statements about the market for chicken describes a change in the quantity demanded and which describes a change in demand? I People are buying less chicken because the price of beef has fallen. II People are buying less chicken because the price of chicken has increased. III People are buying more chicken because the price of chicken has fallen. IV The cost of chicken feed has increased. A. I, II, and III are changes in demand and IV is a change in the quantity demanded. B. I is a change in the quantity demanded and II and III are changes in demand. C. I is a change in demand and II and III are changes in the quantity demanded. D. I, II, and III are changes in the quantity demanded and IV is a change in demand.
C A change in demand is a change in the quantity that people plan to buy when any influence on buying plans other than the price of the good changes. Statement I describes such a change. A change in the quantity demanded is a change in the quantity of a good that people plan to buy that results from a change in the price of the good with all other influences on buying plans remaining the same. Statements II and III describe such a change.
In the market for jeans, which of the following events increases the demand for a pair of jeans? A. The wage rate paid to garment workers rises. B. The price of denim cloth falls C. The price of a denim skirt (a substitute for jeans) rises. D. New technology reduces the time it takes to make a pair of jeans.
C A denim skirt is a substitute for jeans. The demand for a good and the price of one of its substitutes move in the same direction. So the demand for jeans increases if the price of a denim skirt rises.
In market equilibrium, at the equilibrium price and equilibrium quantity, _____ . A. demand is not greater than supply B. demand equals supply C. the quantity demanded equals the quantity supplied and equals the quantity bought and sold D. both the quantity demanded equals the quantity supplied and demand equals supply.
C In market equilibrium, the quantity demanded equals the quantity supplied and buying plans and selling plans are in balance. The equilibrium price is the price at which the quantity demanded equals the quantity supplied. The equilibrium quantity is the quantity bought and sold at the equilibrium price. OK
Jeb makes the following four statements about peanuts. Which statement best describes his quantity demanded in the peanut market? A. I'll stop eating peanuts when I can afford to buy walnuts. B. If peanuts were less expensive, I'd buy them more often. C. At a price of $1 per pack, I plan to buy 2 packs of peanuts per week. D. I eat peanuts to complement cola.
C The quantity demanded of any good is the amount that people are willing and able to buy during a specified period at a specified price, so Jeb's statement, "At a price of $1 per pack, I plan to buy 2 packs of peanuts per week" describes his quantity demanded in the peanut market.
Change in Quantity Demanded Versus Change in Demand
CHANGE IN DEMAND; The influences on buyers' plans that you've just seen bring a change in demand. These are all the influences on buying plans EXCEPT FOR THE PRICE OF THE GOOD. EX:If some influence on buyers' plans other than the price of bottled water changes, there is a change in demand. When the demand for bottled water decreases, the demand curve shifts leftward. When the demand for bottled water increases, the demand curve shifts rightward. CHANGE IN QUANTITY DEMANDED; occurs when THE PRICE OF A GOOD changes and all other influences on buying plans remain the same, we say there has been a change in the quantity demanded. EX:If the price of bottled water rises when other things remain the same, the quantity demanded of bottled water decreases and there is a movement up along the demand curve D0. If the price falls when other things remain the same, the quantity demanded increases and there is a movement down along the demand curve.
Supply is _____, when all other influences on buying plans remain the same. A. the quantity of a good that producers plan to sell B. the relationship between the quantity supplied of a good and the cost of labor used to produce it C. the is the quantity of a good that producers would be willing to sell if costs were lower D. the relationship between the quantity supplied of a good and the price of the good
D
Which of the following statements describes a change in the quantity supplied and which describes a change in supply? I Farms are selling less chicken because the price of turkey has increased. II Farms are selling less chicken because the price of chicken has fallen. III Farms are selling more chicken because the price of chicken has risen. IV Farms are selling more chicken because the cost of chicken feed has fallen. A. I is a change in the quantity supplied and II, III, and IV are changes in supply. B. I, II, and III are changes in the quantity supplied and IV is a change in supply C. I, II, and III are changes in supply and IV is a change in the quantity supplied. D. I and IV are changes in supply and II and III are changes in the quantity supplied.
D A change in supply is a change in the quantity that suppliers plan to sell when any influence on selling plans other than the price of the good changes. Statements I and IV describe events that change supply. A change in the quantity supplied is a change in the quantity of a good that suppliers plan to sell that results from a change in the price of the good. Statements II and III describe changes in price and quantity supplied.
Which of the following statements describes the law of market forces? A. A rise in the price of cabbage creates a surplus of cabbage and a fall in the price of corn creates a shortage of corn. B. When the price of cabbage increased, nothing else changed and people bought less cabbage. C. When the price of corn fell, nothing else changed and farmers planted fewer acres with corn. D. A shortage of cabbage increased the price of cabbage and a surplus of corn lowered its price.
D The law of market forces states that when there is a surplus, the price falls; and when there is a shortage, the price rises. So the statement "A shortage of cabbage increased the price of cabbage and a surplus of corn lowered its price" is description of the law of market forces at work.
Which of the following statements by Aqua Springs demonstrates that the firm's selling plans obey the law of supply? A. We can easily decrease the production of plain water and increase the production of flavored water. B. At a price of $1 gallon, we plan to sell 2,000 gallons per day. C. We've been hit by a rise in the price of plastic bottles and will lower production. D. If the price of bottled water falls and all the other influences on our selling plans remain the same, we will cut back on production and lay off some workers
D The law of supply states: Other things remaining the same, if the price of a good rises, the quantity supplied of that good increases; and if the price of a good falls, the quantity supplied of that good decreases. So when Aqua Springs says "If the price of bottled water falls and all the other influences on our selling plans remain the same, we will cut back on production and lay off some workers," the firm is describing how its decisions obey the law of supply.
How do Expected Future Prices effect the supply curve?
EX: a severe frost that wipes out Florida's citrus crop doesn't change the production of orange juice today, but it does decrease production later in the year when the current crop would normally have been harvested. Sellers of orange juice will expect the price to rise in the future. To get the higher future price, some sellers will increase their inventory of frozen juice, and this action decreases the supply of juice today.
demand and supply model
Explains how competitive markets determine prices and the quantities bought and sold
How does income shift the demand curve?
For a normal good -a rise in income brings an increase in demand -and a fall in income brings a decrease in demand. For an inferior good -a rise in income brings a decrease in demand -and a fall in income brings an increase in demand For example, if your income increases and you decide to buy more chicken and less pasta, for you, chicken is a normal good and pasta is an inferior good.
Sellers, on the supply side of a market,
Like a high price, and the higher the price the greater is the quantity they plan to sell. This effect of price on selling plans is the law of supply.
How do the Number of Sellers effect the supply curve
The greater the number of sellers in a market, the larger is the supply. EX: many new sellers have developed springs and water-bottling plants in the United States, and the supply of bottled water has increased.
4.3 Explain how demand and supply determine price and quantity in a market, and explain the effects of changes in demand and supply.
The law of market forces brings market equilibrium—the equilibrium price and equilibrium quantity at which buyers and sellers trade. -The price adjusts to maintain market equilibrium—to keep the quantity demanded equal to the quantity supplied. A surplus brings a fall in the price to restore market equilibrium; a shortage brings a rise in the price to restore market equilibrium. -Market equilibrium responds to changes in demand and supply. An increase in demand increases both the price and the quantity; a decrease in demand decreases both the price and the quantity. An increase in supply increases the quantity but decreases the price; and a decrease in supply decreases the quantity but increases the price.
How do Prices of Resources and Other Inputs effect the supply curve?
The more it costs to produce a good, the smaller is the quantity supplied of that good at each price (other things remaining the same). EX: if the wage rate of bottling-plant workers rises, it costs more to produce a bottle of water, so the supply of bottled water decreases.
Predicting Price Changes: Three Questions
To explain and predict changes in prices and quantities, we need to consider only changes in the equilibrium price and the equilibrium quantity. We can work out the effects of an event on a market by answering three questions: 1. Does the event influence demand or supply? 2. Does the event increase or decrease demand or supply—shift the demand curve or the supply curve rightward or leftward? 3. What are the new equilibrium price and equilibrium quantity and how have they changed?
Changes in Supply (happens when there is no change in price)
When any of these other influences on selling plans change, there is a change in supply, which means that there is a new supply schedule and new supply curve. The supply curve shifts. -When supply decreases, the supply curve shifts leftward -When supply increases, the supply curve shifts rightward
Effects of Changes in Both Demand and Supply
When demand and supply change in the same direction, the equilibrium quantity changes in that same direction, but we need to know the magnitudes of the changes in demand and supply to predict whether the price rises or falls. If demand increases by more than supply increases, the price rises. But if supply increases by more than demand increases, the price falls.
How does Expected Future Income and Credit shift the demand curve?
When income is expected to increase in the future or when credit is easy to get, the demand for some goods increases. And when income is expected to decrease in the future, or when credit is hard to get and the cost of borrowing is high, the demand for some goods decreases. Changes in expected future income and the availability and cost of credit have the greatest effect on the demand for big ticket items such as homes and automobiles. Modest changes in expected future income or credit availability bring large swings in the demand for these items.
How do Preferences shift the demand curve?
When preferences change, the demand for one item increases and the demand for another item (or items) decreases. EX: preferences have changed as people have become better informed about the health hazards of tobacco. This change in preferences has decreased the demand for cigarettes and has increased the demand for nicotine patches. Preferences also change when new goods become available. EX: the development of smartphones has decreased the demand for landlines and has increased the demand for Internet service.
Law of market forces
When there is a surplus, the price falls; and when there is a shortage, the price rises. A surplus is the amount by which the quantity supplied exceeds the quantity demanded. If there is a surplus, suppliers must cut the price to sell more. Buyers are pleased to take the lower price, so the price falls. Because a surplus arises when the price is above the equilibrium price, a falling price is exactly what the market needs to restore equilibrium. A shortage is the amount by which the quantity demanded exceeds the quantity supplied. If there is a shortage, buyers must pay a higher price to get more. Sellers are pleased to take the higher price, so the price rises. Because a shortage arises when the price is below the equilibrium price, a rising price is exactly what is needed to restore equilibrium. Because price adjustments eliminate shortages and surpluses, markets are normally in equilibrium. When an event disturbs an equilibrium, a new equilibrium soon emerges.
Does the quantity supplied increase if the price rises and decrease if the price falls?
Yes, because factors of production are not equally productive in all activities, as more of a good is produced, the opportunity cost of producing it increases. A higher price provides the incentive to bear the higher opportunity cost of increased production. -the higher price brings a larger profit, so sellers have greater incentive to increase production.
How does a Complement shift the demand curve?
a good that is consumed with another good. Ex:A helmet is a complement of a bike. The demand for a good and the price of one of its complements move in opposite directions. The demand for a good decreases if the price of one of its complements rises and increases if the price of one of its complements falls. For example, the demand for helmets decreases when the price of a bike rises.
A demand curve
is a graph of the relationship between the quantity demanded of a good and its price when all the other influences on buying plans remain the same. Along the demand curve, when the price of the good falls, the quantity demanded increases. (movement downward along curve) When the price rises, the quantity demanded decreases. (movement upward along curve)
Supply Curve
is a graph of the relationship between the quantity supplied of a good and its price when all the other influences on selling plans remain the same. The upward-sloping supply curve illustrates the law of supply. When the price rises, the quantity supplied increases; and when the price falls, the quantity supplied decreases.
Demand schedule
is a list of the quantities demanded at each different price when all the other influences on buying plans remain the same.
Supply Schedule
is a list of the quantities supplied at each different price when all the other influences on selling plans remain the same.
competitive market
is one with many buyers and many sellers: no single buyer or seller is able to set the market price. A market has two sides: on the demand-side are the buyers, and on the supply-side are the sellers.
Demand (Any influence other that the price of a good)
is the relationship between the quantity demanded and the price of a good when all other influences on buying plans remain the same. The quantity demanded is one quantity at one price. Demand is a list of quantities at different prices illustrated by a demand schedule and a demand curve.
Supply
is the relationship between the quantity supplied and the price of a good when all other influences on selling plans remain the same. Supply is a list of quantities at different prices illustrated by a supply schedule and a supply curve.
Market demand
is the sum of the demands of all the buyers in a market.
Market supply
is the sum of the supplies of all the sellers in the market.
Market equilibrium
occurs when the quantity demanded equals the quantity supplied—when buyers' and sellers' plans are in balance. At the equilibrium price, the quantity demanded equals the quantity supplied. The equilibrium quantity is the quantity bought and sold at the equilibrium price. -equilibrium occurs where the demand curve and the supply curve intersect
The Quantity Supplied (Qs)
of a good, service, or resource is the amount that people are willing and able to sell during a specified period at a specified price. EX: when the price of spring water is $1.50 a bottle, a spring owner decides to sell 2,000 bottles a day. The 2,000 bottles a day is the quantity supplied of spring water by this individual producer. The quantity supplied is one quantity at one price.
Quantity Demanded (Qd) (influenced by price of good)
of any good, service, or resource is the amount that people are willing and able to buy during a specified period at a specified price. Ex: when spring water costs $1 a bottle, you decide to buy 2 bottles a day. The 2 bottles a day is your quantity demanded of spring water. (movement along the demand curve)
Law of Supply
states other things remaining the same, if the price of a good rises, the quantity supplied of that good increases; and if the price of a good falls, the quantity supplied of that good decreases. EX: the law of supply states that when all other things remain the same, if the price of bottled water rises, spring owners will offer more water for sale; if the price of a flat-screen TV falls, Sony Corp. will offer fewer flat-screen TVs for sale.
