Lecture 3 - Demand, Supply, Equilibrium Flashcards
Competitive Markets
What does a competitive market have?
- Many buyers and sellers
- of the same good or service
- none of whom can influence the price
The ______ and ______ model is a model of how a competitive market _______.
The SUPPLY and DEMAND model is a model of how a competitive market behaves.
Demand
Demand represents the _________ __ _______.
Demand represents the BEHAVIOUR OF BUYERS.
Demand
What does a demand curve show?
The quantity demanded at various prices.
Demand
What is the quantity demanded?
The quantity that buyers are willing (and able) to purchase at a particular price.
The Demand Schedule and The Demand Curve
What is the law of demand?
As price falls, the quantity demand _____.
A higher price for a good or service leads to people to demand a smaller quantity.
As price falls, the quantity demand rises.
Supply
Supply represents the _________ __ ______.
Supply represents the BEHAVIOUR OF SELLERS.
Supply
What does a supply curve show?
The quantity supplied at various prices.
Supply
What is the supplied demanded?
The quantity that producers are willing and able to sell at a particular price.
Supply
As prices rises, the quantity supplied _____.
As prices rise, the quantity supplied RISES.
Supply
A movement along the supply curve is ___ the same thing as a _____ of the supply curve
A movement along the supply curve is NOT the same thing as a SHIFT of the supply curve.
If a technology company introduces a new gadget to the market which creates long lines of eager customers at stores, what is true about this market?
a) Supply exceeds demand and a shortage occurs
b) Supply exceeds demand and a surplus occurs
c) Demand exceeds supply and a shortage occurs
d) Demand exceeds supply and a surplus occurs
C
Suppose that an especially harsh winter blankets a town in snow all winter, what would happen in the market for snow clearing services?
a) The supply of snow-clearing services would increase, causing prices to rise.
b) The supply of snow-clearing services would decrease, causing prices to rise.
c) The demand for snow-clearing services would increase, causing prices to rise.
d) The demand for snow-clearing services would increase, causing prices to fall.
C
If gas prices drop significantly and remain low for an extended time, industries that use a lot of gasoline, such as airlines, would likely:
a) Increase supply, which would push airfares lower.
b) Increase supply, which would push airfares higher.
c) Decrease supply, which would push airfares lower.
d) Decrease supply, which would push airfares higher.
A
Supply, Demand, and Market Equilibrium
When Qs = Qd at a certain price, the market is in ___________.
That is, the amount consumers would purchase at this price is _______ _______ by the amount producers wish to sell.
Supply, Demand, and Market Equilibrium
When Qs = Qd at a certain price, the market is in EQUILIBRIUM.
That is, the amount consumers would purchase at this price is MATCHED EXACTLY by the amount producers wish to sell.
Supply, Demand and Market Equilibrium
What happens if the price is above equilibrium?
There is a _______ of a good when the quantity supplied ________ the quantity demanded. Surpluses occur when the _____ is _____ its ___________ level.
Surpluses do not last: sellers will ______ price so they can move goods off the shelves.
There is a SURPLUS of a good when the quantity supplied EXCEEDS the quantity demanded. Surpluses occur when the PRICE is ABOVE its EQUILIBRIUM level.
Surpluses do not last: sellers will REDUCE price so they can move goods off the shelves.
Supply, Demand and Market Equilibrium
What happens if the price is a below the equilibrium?
There is a ________ when the quantity demanded _______ the quantity supplied. Shortages occur when the price is _____ its equilibrium level.
Shortages do no last: sells will ________ price to ________ revenue.
There is a SHORTAGES when the quantity demanded EXCEEDS the quantity supplied. Shortages occur when the price is BELOW its equilibrium level.
Shortages do no last: sells will INCREASE price to INCREASE revenue.
