supply and demand

Question 1

equilibrium

Answer 1

when quantity supply is equal to quantity demand

Question 2

surplus

Answer 2

when quantity supply is greater than quantity demand; if something is too expensive you are gonna have a surplus

Question 3

shortage

Answer 3

when quantity demand is greater than quantity supply; if something is too cheap you are gonna have a shortage

Question 4

factors that cause a shift on demand curve

Answer 4

income, taste/preference, price of related goods, number of buyers, expectations

Question 5

income

Answer 5

-normal goods: income up → demand goes up, income down → demand goes down
-inferior goods: income goes → down demand will fall, income down → demand goes up

Question 6

income: normal goods

Answer 6

Examples of normal goods include food, clothing, and household appliances.

Question 7

income: inferior goods

Answer 7

Typical examples of inferior goods include “store-brand” grocery products, instant noodles, and certain canned or frozen foods.
Although some people have a specific preference for these items, most buyers would prefer buying more expensive alternatives if they had the income to do so.

Question 8

taste/preference

Answer 8

how you prefer something results in buying more or less of a product; the more you prefer or like something the higher the demand for that product

Question 9

price of related goods

Answer 9

-compliments: price of item A rises → demand of item B goes down; price of item A fall → demand of item B goes up
-substitutes: prices of item A rises → demand of item B rises; prices of item A decreases → demand of item B falls

Question 10

price of related goods: compliments

Answer 10

when you buy them together, has to influence if you buy or not; ex: car, gas

Question 11

price of related goods: substitutes

Answer 11

typically competing items; ex: generic vs name brand

Question 12

number of buyers

Answer 12

-number of buyers for a product rises→ demand rises
-number of buyers for a product decreases → demand decreases
ex: age to buy cigarettes was 18, now becomes 21, less number of buyers, demand decreases

Question 13

expectations demand

Answer 13

-if the price of an item rises in the future and you know this, the demand will increase
-if there is a sale(wait for sale to happen) in the future for that item and you know this, the demand will decrease

Question 14

factors that cause a shift on supply curve

Answer 14

technology, prices of inputs, number of sellers, expectations

Question 15

technology

Answer 15

-if technology rises, supply goes up
ex: selling t-shirts, originally t-shirts being hand made, limited of people making t-shirt, supply goes down ; now with better technology more t-shirts made supply goes up

Question 16

prices of inputs

Answer 16

-Prices (land, labor, capital) goes up, supply goes down (automatically)
-land
-labor; if workers go on strike (because of wages) if workers get their wanted wage; increase the prices of good and service
-capital (machinery) like rent; decrease the supply

Question 17

number of sellers

Answer 17

-number of sellers goes up, supply goes up
ex: number of coffee shops increase, supply of coffee increases
-sometimes sellers purposely decreases the number of sellers for exclusivity

Question 18

expectations income

Answer 18

-if the prices is going to go down in the future; businesses want to sell more now
-if the prices of an item is going up in the future; businesses want to sell less

-if future prices will go down → supply will rise
-if future prices will go up → supply will decrease

Question 19

supply and demand: price change

Answer 19

the curve does not shift, there is a movement on the supply or demand curve