Supply and demand Flashcards
(20 cards)
What is demand?
A concept ; what people buy at a certain time and price
What is the quantity demanded?
Quantity demanded: numerical demands at different prices
What does the law of demand stipulate?
As the price increases, the Qd decreases
As the price decreases, the Qd increases
What does a demand curve shift mean?
A demand shift
What are the demand shifters?
- number of demanders
- availability of substitutes
- availability of complemtary products
- fads; tastes and preferences
What is supply?
Concept: what producers sell at a certain time and price
What is Qs?
Quantity supplied: numerical representation of supply
Number value of supply at each price
What are the supply shifters?
- The number of suppliers
- Cost of inputs
- Technology
- Expectations, speculation of the market
What is the equilibrium?
- when Qd=Qs=Qe
- “market clearing”
- Only present once on a marjet graph
What is a surplus and how do you fix it ?
When Qs > Qd
The price has to decrease
What is a shortage and how do you fix it?
When Qs < Qd
The price has to increase
What happens when the demand increases?
Pe increases
Qe increases
What happens when the demand decreases?
Pe decreases
Qe decreases
What happens when the supply increases?
Pe decreases
Qe increases
What happens when the supply increases?
Pe decreases
Qe increases
What does the law of supply stipulate?
As price rises, the Qs rises, whereas when the price decreases, the Qs decreases. This is about making profit: price went up, produce more, more money. POV OF SUPPLIER. All based as profit
What happens when both supply and demand increase at the same time?
- Qe increases
- Pe stays the same
- No effect on consumer
What happens when both demand and supply decrease at the same time?
- Qe decreases
- Pe stays the same
What happens when demand increases but supply decreases?
Hyperinflation:
- Qe stays the same
- Pe increases a lot
What happens when supply increases but demand decreases?
Negative inflation:
- The Qe stays the same
- Pe decreases a lot
