Supply and Demand Flashcards
(16 cards)
What is supply and demand?
Supply and demand is when prices change based on how much people want something and how much of it is available.
This principle is fundamental to economic theory and market dynamics.
What is supply in economics?
The quantity of a good or service that producers are willing and able to sell at different prices.
Supply can vary based on factors like production costs and market conditions.
What happens to supply as prices increase?
Supply usually increases because producers can earn more profit.
Higher prices incentivize producers to increase their output.
What factors influence supply?
Costs of inputs, technology, and producer expectations.
These factors can shift the supply curve either to the left or right.
What is demand in economics?
The quantity of a good or service that consumers are willing and able to buy at different prices.
Demand is driven by consumer preferences and purchasing power.
What happens to demand as prices decrease?
Demand usually increases because consumers are more willing to buy.
This relationship is described by the law of demand.
What is the equilibrium price?
The price at which the quantity supplied equals the quantity demanded.
At this price, the market is in balance.
What is a surplus?
A surplus is when there is more of a product available than people want to buy, usually because the price is too high.
What happens when the price is above the equilibrium price?
A surplus occurs, and prices tend to fall.
This is because not all goods can be sold at higher prices, leading to excess supply.
What happens when the price is below the equilibrium price?
A shortage occurs, and prices tend to rise.
Consumers are willing to buy more than what is available at that price.
What does the market look like at equilibrium?
It is stable, with no pressure for price changes unless supply or demand shifts.
Changes in external factors can disrupt this equilibrium.
What is the Law of Supply and Demand?
It states that the price of a good or service is determined by the relationship between its supply and demand.
This law underpins much of economic theory.
What happens when demand increases and supply stays the same?
Prices tend to rise.
Increased demand with unchanged supply leads to upward pressure on prices.
What happens when demand decreases and supply stays the same?
Prices tend to fall.
This reflects lower consumer interest in purchasing at existing prices.
What happens when supply increases and demand stays the same?
Prices tend to fall.
An increase in supply creates downward pressure on prices in a stable demand environment.
What happens when supply decreases and demand stays the same?
Prices tend to rise.
A decrease in supply leads to scarcity, prompting price increases.
