Price Theory Flashcards
(29 cards)
What is the definition of demand
Demand is the quantity of goods and services a consumer is willing and able to buy at a particular price, in a given period
What are the factors that determine demand
- The price of the product
- Income of the consumer
- Price of other (related) products
- Tastes or preferences of consumer (trends)
- Advertising
- Weather Conditions
- Size of the household
Supply and Availability DO NOT influence demand!!
what is used in order to illustrate market demand
A demand schedule and demand graph (curve)
What is the quantity partly depended on
The price of the good
What tpye of relationship is between the price of a good and its quantity demanded
Inverse relationship
What is the definition of the law of the demand
The higher the price of a good or service, the lower the quantity demanded by consumers
What’s a demand schedule
A table showing quantity of Goods or Services demanded at different prices
What’s a demand curve
A graph showing the quantity of a good or service consumers are willing and able to buy at different prices
What is the definition of supply
The planned quantity of a Good or service that produces are willing and able to produce and sell at each possible price level at a given time
Willingness + ability = demand
What are the factors determining supply
- Price of the product
- prices of substitute products
- prices of factors of production and other inputs
- expected future prices
- state of technology (production method)
- the number of producers
- weather
Demand influences price and price influences supply
What illustrates the law of supply
A supply schedule and supply graph
What is dependant on the price of the good
The quantity of a good a producer is willing to supply
What’s the relationship between the price of a good and uts quantity supplied
Direct relationship
What’s the definition of law of supply
The higher the price of a goos or service, the higher the quantity supplied
What can be combined to explain equilibrium in the market for specific good or service
Demand and supply
What’s the definition of market equilibrium
The market is in equilibrium when the quantity demanded is equal to the quantity supplied. The price at which this occurs is called equilibrium
At what point does market equilibrium occur
Where the supply and demand curve intersect
What is market price equals to
Equilibrium price
How do we tell the market is in disequilibrium
If the price of the good or service is set above or below the equilibrium price
What happens when the market is in equilibrium
It creates excess supply or demand
What happens to the market forces when there is disequilibrium
the market forces are set in motion to move the market towards equilibrium
What happens when quantity demanded is more than quantity supplied
It leads to excess demand ( market shortage)
What happens when quantity supplied is more than quantity demanded
It leads to excess supply (market surplus)
What happens when any of the other factors that determine demand change (price excluded)
The entire demand curve will shift
