Econ Test Supply and Demand
What variables are found on a supply curve?
Quantity on the horizontal axis and price on the vertical axis.
What causes the supply curve to shift?
ROTTEN
What does "ceteris paribus" mean?
"All things equal"
What is Equalibrium?
Equilibrium is where quantity supplied and quantity demanded intersect at a certain price. Market clearing (no surplus no shortage)
What is the equilibrium price?
Equilibrium price is the price at which the market has agreed upon (left side of graph)
E in ROTTTEN
Expectations
E in SPICE
Expectations Expect higher prices in future, demand increases right now
What does a change in price do? (Demand)
A change in price will move along the demand curve (up or down)
What is a demand curve?
A demand curve is a curve that shows every quantity demanded at every price
What does the demand curve show?
A demand curve shows the relationship between demand and quantity demanded
What is a Supply Curve?
A graph that shows how a change in the price of a good or service affects the quantity a seller supplies.
What is Supply?
A stock of a resource from which a person or place can be provided with the necessary amount of that resource.
Market
An institution that brings buyers and sellers together
C in SPICE
Complements An increase in the price of one, leads to a decrease in demand for other
What is the difference between "demand" and "quantity demanded"?
Demand is at each price while quantity demanded is at a certain price
I in Spice
Income Normal good: As income raises the demand for the good increases. Inferior Good. As income raises the demand for the good decreases.
What does a change in price do? (Supply)
Increase price- moves up the curve, decrease in price moves down the curve
Does the demand curve actually have to curve?
No, but it can shift if the demand increases or decreases.
N in ROTTEN
Number of Sellers
O in ROTTEN
Other goods' prices
P in Spice
Population/Preferences Increase number of buyers, shifts curve right. Increase in tastes and preferences shifts curve right.
R in ROTTEN
Resource costs and availability
What causes the demand curve to shift?
S.P.I.C.E.
What does a supply curve show?
Shows how price affects quantity supplied, other things being equal "ceteris paribus". These "other things" are non-price determinants of supply
S in SPICE
Substitutes. Increase in the price of one leads to an increase in demand for the other
What is the difference between "supply" and "quantity supplied"?
Supply is at all prices while quantity supplied is at a certain price
Second T in ROTTEN
Taxes and subsides
T in ROTTEN
Technology
What is Demand?
The amount of some good or service consumers are willing and able to purchase at each price
What is equilibrium quantity?
The quantity at which the market has agreed on (How much) (bottom of graph)
What variables are found on a demand curve?
X and Y. Quantity and price.
