Demand And Supply Flashcards
(25 cards)
What is the law of demand?
As the price of a good decreases, the quantity demanded increases, and vice versa.
True or False: Demand always increases when consumer income increases.
False
What is a demand curve?
A graphical representation of the relationship between the price of a good and the quantity demanded.
Fill in the blank: A decrease in the price of a substitute good will lead to a _____ in the demand for the original good.
decrease
What factors can cause a shift in the demand curve?
Consumer preferences, income levels, prices of related goods, and expectations.
What is the law of supply?
As the price of a good increases, the quantity supplied increases, and vice versa.
True or False: The supply curve typically slopes downwards.
False
What is a supply curve?
A graphical representation of the relationship between the price of a good and the quantity supplied.
Fill in the blank: An increase in production costs will lead to a _____ in the supply of the good.
decrease
What are the determinants of supply?
Production costs, technology, number of sellers, and expectations.
What is market equilibrium?
The point where the quantity demanded equals the quantity supplied.
True or False: At equilibrium, there is a surplus of goods.
False
What happens when there is a surplus in the market?
Prices tend to decrease as suppliers lower prices to clear excess inventory.
What happens when there is a shortage in the market?
Prices tend to increase as consumers compete to purchase the limited supply.
What is price elasticity of demand?
A measure of how much the quantity demanded of a good responds to a change in its price.
Fill in the blank: If the price elasticity of demand is greater than 1, demand is considered _____.
elastic
What is the difference between a change in demand and a change in quantity demanded?
A change in demand refers to a shift of the entire demand curve, while a change in quantity demanded refers to movement along the curve due to price changes.
What is the effect of a tax on supply?
It typically decreases supply by increasing production costs.
What does the term ‘ceteris paribus’ mean?
It means ‘all other things being equal’ and is used to isolate the effect of one variable.
True or False: Normal goods have an inverse relationship with income.
False
What are inferior goods?
Goods for which demand increases as consumer income decreases.
What is the impact of consumer expectations on demand?
If consumers expect prices to rise in the future, current demand may increase.
What is a complementary good?
A good that is consumed together with another good, where an increase in the price of one leads to a decrease in demand for the other.
Fill in the blank: A rightward shift in the supply curve indicates an _____ in supply.
increase
