Macroeconomics FTC1- Supply and Demand

Quantity Supplied

Represents a specific good at a specific price.

Quantity Demanded

The cost of one specific quantity at one specific price.

How demand is effected in regards to a good and it's complement.

The demand for a good and the price of its complement move in the opposite direction.

How demand is effected in regards to a good and it's substitute.

The demand for a good and the price of its substitute move in the same direction.

How the number of sellers in a market affects supply.

The greater is the number of sellers in a market, the larger is the supply.

How the number of buyers in a market influences demand.

The greater the number of buyers in the market, the larger demand is.

Equilibrium Price

The price at which the market is in equilibrium.

Change in the Quantity Demanded vs. Change in Demand

•A change in the quantity demanded arises from a change in price that results in a movement along the demand curve •A change in demand arises from a change in other factors that shifts the demand curve

Other things remaining the same, an increase in demand results in . . .

... an increase in the equilibrium price as well as the equilibrium quantity.

Other things being equal, a decrease in supply results in . . .

... an increase in the equilibrium price but a decrease in the equilibrium quantity.

A decrease in demand while supply increases results in . . .

... the equilibrium price falling unambiguously.

How a change in supply affects the supply curve.

A change in supply shifts the supply curve. An increase in supply shifts the supply curve rightward, and a decrease in supply shifts the supply curve leftward.

Change in the Quantity Supplied vs. Change in Supply

A change in the quantity demanded occurs with a change in price results in a movement along the supply curve. A change in supply occurs when a change in other factors shifts the supply curve.

Demand Curve

A graph of the relationship between the quantity demanded of a good and its price, other things remaining the same.

Supply Curve

A graph of the relationship between the quantity supplied of a good and its price, other things being equal.

Supply Schedule

A list of the quantities supplied at each price when all other factors remain the same.

Demand Schedule

A tabular list of the quantities demanded and different prices when all other factors remain the same.

How demand is increased/decreased depending on the future price of a product/good.

An expectation of a higher future price of a good increases the current demand for that good; an expectation of a lower future price of a good decreases the current demand for that good.

Ways in which a demand curve shifts.

An increase in demand shifts the demand curve rightward, and a decrease in demand shifts the demand curve leftward.

How productivity affects supply.

An increase in productivity lowers the cost of producing a unit of good, so that supply increases. As the cost of producing a computer decreases, the supply of computers increases.

Substitute Good

Another good that can be consumed in its place.

Complement Good

Another good that is consumed along with it.

Surplus

When the quantity of goods supplied is higher than the quantity of goods demanded.

How income influences demand.

For a normal good, a rise in income brings an increase in demand. For an inferior good, a rise in income brings a decrease in demand.

High Demand Item

If a good or service is hard to get because it is in limited supply.

Decrease in both Supply and Demand

If both the demand and the supply of a good decrease, both the supply and demand curves shift leftward. As a result, the quantity unambiguously will decrease but the effect on the price is ambiguous. If the decrease in demand is greater than the decrease in supply, the price will decrease. If the decrease in demand is the same size as the decrease in supply, the price will not change. If the decrease in demand is less than the decrease in supply, the price will increase.

Changes in both Supply and Demand

If both the demand and the supply of a good increase, both the supply and demand curves shift rightward. As a result, the quantity unambiguously will increase but the effect on the price is ambiguous. If the increase in demand is greater than the increase in supply, the price will increase. If the increase in demand is the same size as the increase in supply, the price will not change. If the increase in demand is less than the increase in supply, the price will decrease.

Decrease in Demand, Increase in Supply

If the demand decreases while the supply increases, the demand curve shifts leftward and the supply curves shifts rightward. As a result, the price unambiguously will decrease but the effect on the quantity is ambiguous. If the decrease in demand is greater than the increase in supply, the quantity will decrease. If the decrease in demand is the same size as the increase in supply, the quantity will not change. If the decrease in demand is less than the increase in supply, the quantity will increase.

Effects of a change in demand.

If the demand for a good increases, the demand curve shifts rightward. As a result, both equilibrium price and equilibrium quantity increase. If the demand for a good decreases, the demand curve shifts leftward. As a result, both the equilibrium price and equilibrium quantity decrease.

Increase in Demand, Decrease in Supply

If the demand increases while the supply decreases, the demand curve shifts rightward and the supply curve shifts leftward. The price unambiguously rises but the effect on the quantity is ambiguous. If the increase in demand is greater than the decrease in supply, then the quantity will increase. If the increase in demand is the same size as the decrease in supply, the quantity will not change. If the increase in demand is less than the decrease in supply, the quantity will decrease.

Effects of a Change in Supply on Supply Curve

If the supply of a good or service increases, the supply curve shifts rightward. As a result, the equilibrium price falls and the equilibrium quantity increases. If the supply of a good or service decreases, the supply curve shifts leftward. As a result, the equilibrium price rises and the equilibrium quantity decreases.

Change in Supply

Occurs when any factor other than the price of the good changes.

Law of Demand

Other things being equal, the quantity demanded of a good decreases as the price of that good increases.

How the price of resources and other inputs affect supply and production.

Other things remaining the same, the more it costs to produce a good, the lower its supply.

In addition to the Law of Demand, a change in demand can also occur when other related factors such as these change.

Price of related goods, expected future prices, income, expected future income and credit, number of buyers and preferences.

Shortage

When the quantity of goods supplied is lower than the quantity of goods demanded.

Equilibrium Quantity

The quantity bought and sold when the market is in equilibrium.

Difference between quantity demanded and demand.

The quantity demanded is one quantity at one price, and demand is a list of quantities at different prices.

Law of Supply

The quantity supplied is one quantity at one price, and supply is a list of quantities at different prices. Supply can be illustrated by a supply schedule, a table, or a supply curve.

The difference between Quantity Supplied and Supply.

The quantity supplied is one quantity at one price, and supply is a list of quantities at different prices. Supply can be illustrated by a supply schedule, a table, or a supply curve.

Supply

The relationship (with all elements being equal) between the price of a good and how much of that good is produced or available.

Demand

The relationship between the price of a good and how much of that good consumers want to purchase (all elements being equal).

Market Equilibrium

The state at which the quantity of goods supplied equals the quantity of goods demanded.

Market Demand

The sum of the demands of all the buyers in a market.

Market Supply

The sum of the supplies of all the sellers in a market.

How supply is affected in regards to a good and it's complement.

The supply of a good and the price of its complement in production move in the same direction. If the price of a complement in production rises, the supply of a good rises.

How supply is affected in regards to a good and it's substitute.

The supply of a good and the price of its substitute in production move in opposite directions. If the price of a substitute in production rises, the supply of a good falls.

How preferences affect demand.

When preferences change, the demand for one item increases and the demand for another item decreases.

How expected future income and credit influences demand.

When you expect your income to increase in the future or you can get credit more easily, the demand for some goods increases. Changes in expected future income and the availability of credit have a larger effect on the demand for big ticket items, such as homes and automobiles.