Unit 1: Chapter 4: Supply and Prices Flashcards Preview

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Flashcards in Unit 1: Chapter 4: Supply and Prices Deck (16)
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1
Q

Define the Term: Supply

A

The amount of good and services businesses are willing AND able to provide

2
Q

Define the Term: The Law of Supply

A

The higher the price buyers are willing to pay, the greater the quantity of a product businesses will produce and vice versa (all other things being equal)

3
Q

What happens to a supply curve when there is a DECREASE in supply

A

A leftward shift

4
Q

What are the three factors that create changes in supply/willingness to produce more

A

Change in technology
Change in production costs
Change in the price of related goods

5
Q

Which way does a supply curve slope and why?

A

Up and to the right, because the greater the price buyers are willing to pay for the product, the greater the quantity businesses will supply

6
Q

What is the market equilibrium point?

A

The point at which supply and demand are completely in balance/meet on their respective curves

7
Q

Define the Term: Surplus

A

When there is more of a good/service produced than demand will consume

8
Q

Be able to draw a demand and supply curve

A

See page 72 for example

9
Q

Why might there be more goods produced than demand will consume?

A

Raised prices
Lowered cost of related goods
Changes in customer expectations
Changes in fads

10
Q

Define the Term: Price Floor

A

A barrier (usually imposed by the Government) that prevents the price of a good or service from dropping below a certain point

11
Q

Define the Term: Shortage

A

When there is less of a good/service produced than demand will consume

12
Q

Define the Term: Price Ceilings

A

A barrier (usually imposed by the Government) that prevents the price of a good or service from rising above a certain point

13
Q

What occurs when the price of a product is higher than the price at which supply equals demand?

A

A surplus

14
Q

What is the simplest solution to a surplus?

A

Producer lowers the price until quantity demanded equals the quantity he has to supply

15
Q

What problems can arise from a price floor?

A

An inability to lower prices results in lower demand and may create a surplus

16
Q

What problems can arise from a price ceiling?

A

An inability to raise prices results in higher demand and may create a shortage