Chapter 3 - Demand, Supply & Price
The lower the price...
... the higher the quantity demanded
The higher the price...
... the lower the quantity demanded.
What is a change in demand?
A change in quantity demanded at each possible price point of the commodity.
What is a change in supply?
A change in the quantity that will be supplied at every price point.
What is change in quantity demanded?
A change in the specific quantity of a good demanded.
What does a leftward shift of a demand curve represent?
A decrease in demand
What does a leftward shift in the supply curve represent?
A decrease supply
What is flow?
A quantity per unit of time.
How is a change in demand represented?
A shift in the whole demand curve
What is the Demand Schedule?
A table showing the relationship between quantity demanded and the price of a commodity.
What is the supply schedule?
A table showing the relationship between quantity supplied and the price of the commodity.
What is stock?
A variable whose value has meaning at a point in time.
What does a rightward shift of a demand curve represent?
An increase in demand
What does a rightward shift in the supply curve represent?
An increase in supply
What is market?
Any situation in which buyers/sellers negotiate the transaction of goods/services.
What is excess demand?
At a given price, the quantity demanded exceeds the quantity supplied.
What is excess supply?
At a given price, the quantity supplied exceeds quantity demanded.
How is a change in quantity demanded represented?
By a change from one point on a demand curve to another point.
What does excess supply do to price?
Causes downward pressure on price.
What does excess demand do to price?
Causes upward pressure on price.
What variables that influence shifts in demand?
Consumers income Price of Other Goods Taste Population Significant Changes in Weather
Lower product price = ?
Decreased supply
What does a decrease in demand do to the equilibrium price and quantity?
Decreases the equilibrium price and equilibrium quantity.
What does an increase in supply do to the equilibrium price and quantity?
Decreases the equilibrium price and increases the equilibrium quantity
What are inferior goods?
Goods for which the quantity demanded decreases when income rises.
What are normal goods?
Goods for which the quantity demanded increases when income rises
What are substitutes in consumption?
Goods that can be used in place of another to satisfy similar needs/desires.
What are complements in consumption?
Goods that tend to be consumed together.
What is a Demand Curve?
Graphical representation of the relationship between quantity demanded and price. Has a negative slope.
What is the supply curve?
Graphical representation of the relationship between the quantity supplied and the price of the commodity. Has a positive slope
How do markets differ?
In the degree of competition among various buyers/sellers.
Higher product price = ?
Increased supply
What does a decrease in supply do to the equilibrium price and quantity?
Increases the equilibrium price and decreases in the equilibrium quantity.
What does an increase in demand do to the equilibrium price and quantity?
Increases the equilibrium price and equilibrium quantity.
What is change quantity supplied?
Movement from one point on a supply curve to another.
When quantity supplied increases...
Price decreases
When quantity supplied decreases...
Price increases
What are variables that influence supply?
Price of inputs Technology Government taxes/subsides Price of Other products Number of suppliers
Mathematical equation for market equilibrium?
QD = QS Quantity demanded = Quantity supplied
What is the Quantity Bought?
Refers to actual purchases.
What is the disequilibrium price?
TThe price at which there is excess demand, or excess supply.
What quantity sold?
The actual amount sold
What is Quantity Actually Sold?
The amount of a product a firm has actually sold?
What is the Quantity Supplied?
The amount of a product that firms desire to sell in some time period.
What is the Absolute Price?
The amount of money that must be spent to acquire one unit of a commodity.
What is quantity supplied?
The amount of products that producers are willing to offer for sale.
What is the equilibrium price?
The price at which quantity demanded and quantity supplied are equal. The point where the demand and supply meet.
What is The Law of Demand?
The price of a product and the quality demanded are negatively related.
The Law of Supply
The price of the product and the quantity supplied are positively related, because producers are always interested in making profits.
What is the Relative Price?
The ratio of the two absolute prices; it expresses the price of one good relative another.
What is demand?
The relationship the between quantity of a commodity that buyers want to purchase and the price of that commodity.
What is the Quantity Demanded?
The total amount that consumers desire to purchase in some time period.
