Week 2 Quiz: Basic Economic Concepts (part 2)

What factors cause the demand curve to shift?

1. Change in price of related goods/services 2. Change in consumer income 3. Change in taste 4. Change in expectations 5. Change in number of consumers

What factors cause the supply curve to shift?

1. Change in price of related production goods/services 2. Change in input prices 3. Change in technology 4. Change in expectations 5. Change in number of producers

Difference between changes in quantity demanded and change in demand

A change in quantity demanded is a change in how much of a product/service consumers are willing to buy at a given price. A change in demand is a change in the willingness/ability of consumers to purchase a good at all given prices.

Difference between changes in quantity supplied and change in supply

A change in quantity supplied is a change in how much of a product/service that producers are willing to provide at a given price. A change in supply is a change in the willingness or ability of sellers to produce and sell a good at all given prices.

If a point on the supply and demand graph is below equilibrium, what results?

A scarcity results because the demand exceeds the quantity available at that price, forces prices to rise.

If a point on the supply and demand graph is above equilibrium, what results?

A surplus results because the supply exceeds the demand at that price, forcing prices to drop.

Determinants of demand

Amount that consumers are willing to buy at a given price.

Determinants of supply

Amount that producers are willing to supply at a given price.

How does improvement in technology affect the supply curve?

Better technology enables producers to make more of a good/service at a lower cost, leading to an increase in supply (right shift).

How does change in taste affect demand curve?

If a new fad or belief is against the good/service, demand will decrease (left shift). If a new fad or belief is in favor of the good/service, demand will increase (right shift).

How does change in expected future income affect the demand curve?

If consumers expect a future drop in income, demand will decrease (left shift). If consumers expect a future increase in income, demand will increase (right shift).

How does change in expected future price affect the demand curve?

If consumers expect a future drop in price, demand will decrease for today (left shift). If consumers expect a future increase in price, demand will increase for today (right shift).

How does change in expected future price affect the supply curve?

If suppliers expect the future price of a good to increase, their supply will decrease for today (left shift). If suppliers expect the future price of a good to decrease, their supply will increase for today (right shift).

How does change in income affect the demand curve?

If the good is an inferior good, increased income will decrease demand (left shift) and decreased income will increase demand (right shift). If the good is a normal good, increased income will increase demand (right shift) and decreased income will decrease demand (left shift).

How does the price of a complement good affect the demand curve?

If the price of a complement increases, demand decreases (left shift). If the price of a complement decreases, demand increases (right shift)

How does the price of a substitute good affect the demand curve?

If the price of a substitute increases, demand increases (right shift). If the price of a substitute decreases, demand decreases (left shift)

How does change in input prices affect the supply curve?

Increased input price increases overall production cost, making producers less willing to supply, and leading to a decrease in supply (left shift). Decreased input price decreases overall production cost, making producers more willing to supply, and leading to an increase in supply (right shift).

How does change in number of consumers affect the demand curve?

Increased number of consumers increases demand (right shift). Decreased number of consumers decreases demand (left shift).

How does change in number of producers affect the supply curve?

Increased number of producers leads to a greater supply (right shift). Decreased number of producers leads to a lower supply (left shift).

How does change in production complement prices affect the supply curve?

Increased price of a complement good/service will cause producers to increase their production of the main good (right shift). Decreased price of a complement good/service will cause producers to decrease their production of the main good (left shift).

How does change in production substitute prices affect the supply curve?

Increased price of substitute good/service will cause producers to decrease their production of the main good (left shift). Decreased price of a substitute good/service will cause producers to increase their production of the main good (right shift).

Law of demand

Other things being equal, a higher price for a good or service leads people to demand a smaller quantity of that good or service.

Law of supply

Other things being equal, price and quantity supplied of a good are positively related.

Equilibrium effect: Supply curve doesn't change, Demand curve shifts left

Quantity decreases, price decreases

Equilibrium effect: Supply curve shifts left, Demand curve doesn't change

Quantity decreases, price increases

Equilibrium effect: Supply curve shifts left, Demand curve shifts left

Quantity decreases, price indeterminate

Equilibrium effect: Supply curve shifts right, Demand curve doesn't change

Quantity increases, price decreases

Equilibrium effect: Supply curve doesn't change, Demand Curve shifts right

Quantity increases, price increases

Equilibrium effect: Supply curve shifts right, Demand curve shifts right

Quantity increases, price indeterminate

Equilibrium effect: Supply curve shifts right, Demand curve shifts left

Quantity indeterminate, price decreases

Equilibrium effect: Supply curve shifts left, Demand Curve shifts right

Quantity indeterminate, price increases

When does a point on the demand curve move?

When how much of a good consumers are willing to buy at one given price changes, or if the supply curve shifts.

Equilibrium

When no individual would be better off doing something different, and quantity demanded of a good is equal to the quantity supplied of that good.

When does a point on the supply curve move?

When the amount of goods consumers are willing to buy at a one given price changes, or if the demand curve shifts.

When does the demand curve shift?

When the willingness or ability of consumers to purchase a good changes.

When does the supply curve shift?

When the willingness or ability of sellers to produce and sell a good changes.