CH3: Demand, Supply, and Prices Flashcards
(7 cards)
What factors cause a shift in the demand curve?
Determinants include income, tastes, prices of related goods, expectations, and number of buyers. A change in demand shifts the curve, a change in quantity demanded is a movement along the curve due to price. Increased demand shifts the curve right, decreased demand shifts it left.
What factors cause a shift in the supply curve?
Determinants include input costs, technology, expectations, number of sellers, and government policy. A change in supply shifts the curve, a change in quantity supplied is movement along the curve. Increased supply shifts the curve right, decreased supply shifts it left.
What is a surplus or shortage and how do they affect markets?
Consumer surplus is the difference between what consumers are willing to pay and what they actually pay. It measures the benefit to buyers in a transaction.
What is demand and the law of demand?
Demand is the quantity of a good consumers are willing and able to buy at various prices. The law of demand states that as price increases, quantity demanded decreases (inverse relationship). The demand curve slopes downward from left to right.
What is market equilibrium and what happens when it’s disrupted?
Equilibrium is where quantity demanded equals quantity supplied. Above equilibrium: surplus (excess supply). Below equilibrium: shortage (excess demand). Markets tend to adjust back to equilibrium over time.
What is supply and the law of supply?
Supply is the quantity of a good producers are willing to sell at different prices. The law of supply states that as price rises, quantity supplied rises (direct relationship). The supply curve slopes upward from left to right.
what are injections in the circular flow model?
Injections are additions to the circular flow of income: Investment (I), Government Spending (G), and Exports (X). They increase overall economic activity.
