supply&demand Flashcards
(15 cards)
relation between demand and price
as price increases, quantity demanded decreases
factors that affect demand curve
- income
- size of the market
- price of a related good
- tastes
- special influences
how does income affect demand
higher income higher demand
how does size of population affect demand
larger population higher demand
how does price of related goods affect demand
the price of a related good contributes to level of demand
example: if price of gas decreases demand on cars may increase
features of demand curve
- sloping downward
- as price changes quantity demanded changes affecting the curve
when does the demand curve shift
when one or more of the factors change
why does the demand curve slope downwards
as the price of a good decreases, the quantity demanded increases and vice versa
why does quantity demanded decrease when price increases
- substitution effect
- income effect
- purchasing power
what is the substitution effect
as the price increases consumer substitute it for a cheaper alternative
what is the income effect
as price of goods increase, you will feel poorer because income didn’t increase by the same amount
what is purchasing power
buying less from a product that had in increase in price and vice verse
relationship between price and quantity supplied
as price increases, suppliers are willing to supply more to maximize profit
factors affecting supply curve
- technology
- input prices
- government policies
- price of a related good
- special influences
supply and demand curve points
- equilibrium: point where they meet
- surplus: above the point
- shortage: below the point
