Supply And Demand Flashcards
(24 cards)
What is law of demand?
Demand for goods or services
As the price rises its quantity demanded falls and vice versa
Draw a demand curve
\
What is law of supply?
The amount available in a market
Law - as the price of goods or service rise, its quantity supplied will rise and vice versa
Draw a supply curve
/
What is equilibrium?
Demand equals quantity supplied
There is no inherent tendency to change
Draw equilibrium
X
What are shortages and surpluses?
Shortage occurs when demand exceeds the supply - implies the market price is too low
Surplus occurs when supply exceeds demand - implies market price is too high
What is shift in demand?
A change in the demand/the quantity wanted by the consumer
What factors affect/cause shift in demand? (4)
- change in consumer incomes
- population change
- consumer preference
- prices of related goods
Draw shift in demand curve
\ \
What is shift in supply?
Change in the quantity supplied at every price
What factors affect/cause shift in supply? (3)
- change in input costs
- increase in technology
- change in size of the industry
Draw shift in supply curve
/ /
Draw equilibrium after demand shift
Draw equilibrium after supply shift
What types of goods are there?
Normal good - food
Luxury good - sport car
Inferior good - cheap alternative like Tesco own food
What does price elasticity of demand (PED) measure?
Measures the responsiveness of the demand to a change of price
What does price elasticity of supply (PES) measure?
Measures the responsiveness of supply to a change in price
What does cross elasticity of demand (XED) measure?
Measures the responsiveness of demand for one good to the change in price of another good
Example iPhone goes in price, Samsung demand may increase as its cheaper
What is concept of elasticity
Measures how sensitive one variable is to a change in another variable
What is the PED calculation
%change in quantity demanded
———————————————
%change in price
What is YED?
Income elasticity of demand
What does YED measure?
Measures the responsiveness of a good to a change in income
What is the calculation for YED
%change in quantity demanded
———————————————
%change in income
