COMM 171 Lecture 3.1 Flashcards
Competitive marekts
Many buyers and
sellers of the same good
or service, none of whom
can influence the price
what is the supply and emand model?
The supply and demand model is a model of how a
competitive market behaves.
The supply and demand model is a model of a competitive
market—one in which there are many buyers and sellers of the
same good or service.
what does demand represent?, what is a demand curve and quantity demanded
Demand represents the behavior of buyer
A demand curve shows the quantity demanded at
various prices.
- The quantity demanded: the quantity that buyers are
willing (and able) to purchase at a particular price.
What is the alw of demand
The Law of Demand: Other things equal, ↑P leads to ↓QD
An increase in demand will do what for a supply and demand graph
A rightward shift in demand is an “increase” in demand
(and vice versa.)
What is the difference between a movemnt alog vs a shift in demand
Movemnt along: is changes in the good’s price
Shift in demand curve: chagnes in factors other than the good’s price
so people are buying ore or less at every price
Examples of grapghing shifts of the demand curve
Changes in
1). Price of related good
- Subsitutes
- Completments
2) Consumer income
3) consumer preference
4) consumer expectations
5) NUmber of consumers
4: explations:
Buyers adjust current spending in anticipation of the
direction of future prices in order to obtain the lowest
possible price
Subsitutes and complents defintnions
Two goods are substitutes if a
decrease in the price of one reduces the demand for the other (or vice versa
Two goods are complements if a decrease in the price of one good increases the demand for the other (or vice versa
Normal good vs inferior good
A normal good: Demand increases when income
increases (and vice versa).
– An inferior good: Demand decreases when income
increases (and vice versa).
Supply curve represents:, and what is quantity supplied for supply
A supply curve shows the quantity supplied at various
prices.
- The quantity supplied is the quantity that producers are
willing and able to sell at a particular price.
Shifts of supply curve versus movment along the supply curve
Movements along these curves are caused by price level variations
While supply shifter include changes in:
Input prices are all the costs that go into producing a good or service.
1) input prices
2) the price of related goods or services
3) technology
4) expectations
5) the number of producers
4 explications The expectation of a higher price for a good in the future
decreases current supply of the good – if they can store
the good
When is the market in equilbirum
Equilibrium is the state in which market supply and demand match, and as a result prices become stable.
market is in equilbirum when Qs = Qd
what happens if the market price if the price is above market equilbirum and WHY?
The market price will fall if it is above the equilbirum price
Because there is a SURPLUS of a good when the quantitiy supplied exceeds teh quantiity demanded
and when the price is higher than the equilbirium than there will be less demand for that good and more suppliers therefore creating a surplus of goods
surpluses do not last: as seller will reduce prices so they ca moe goods off the shelves
What happens if the market prie is below the equilbirum price
When the market price is below the equilbirium price than the market price rises as there is a shortage of goods
shortages do not last: as sellers will increase prices to increase revenue
WHAT HAPPENS WHEN A CURVE SHIFTS?
An incerase in demand: leads to a movement along the supply curve to a higher equilbirium price and higher equilbiurm quantity
An increase in supply leads to a
movement along the demand
curve to a lower equilibrium price
and higher equilibrium quantity.
Figure 13-15
