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50 Cards in this Set
- Front
- Back
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What is a demand curve
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inverse relationship between quantity demanded and price
negatively sloped |
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What is a supply curve?
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positive relationship between price and quantity, positively sloped
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Graphically show the equilibrium price and quantity
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E price at intersection
E quantity is at E price |
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Law of Demand
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all things remain equal, higher the price the less is demanded
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What does a demand curve show?
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*Inverse relationship between quantity demanded and price
*For each quantity, it shows the highest price a person is willing to pay (marginal benefit) |
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When does movement along the demand curve occur?
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When there is a change in price of the good or a change in the quantity demanded
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What causes a demand curve to shift
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When other influences change the buyers plan
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An increase in demand shifts the curve
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Rightward
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A decrease in demand shifts the curve
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Leftward
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Price of a subsitute falls
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decreases demand
shift curve to left |
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population increases
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increases demand
shift curve to right |
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Income rises
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Increases demand
shift curve to the right |
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Price of product will decrease in the future
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Decreases demand
shift curve to the left |
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Price of substitute rises
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Increases demand
shift curve to the right |
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Price of complement falls
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Increases demand
shift curve to the right |
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Population decreases
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Decreases demand
shift curve to the left |
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Price of complement rises
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Decreases demand
shift curve to the left |
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Product price will increase in the future
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Increases demand
shift curve to the right |
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Income falls
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Decreases demand
shift curve to the left |
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Relative price
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*ratio of a price to another
*OC ratio *cost of product gained/ cost of product forgone *theory of demand and supply determine relative price |
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Normal good
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a good that demand increases as income increases
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Inferior good
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a good that demand decreases as income increases
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Law of supply
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all thing remaining the same, the higher price the good the greater the quantity supplied
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What does the supply curve show
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*relationship beetween the quantity supplied and the price
*positively sloped *For each quantity supplied, it shows the minium price a supllier must receive in order to produce that unit of output |
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What causes movement along a supply curve
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A change in the price of quantity supplied
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What causes a shift in the supply curve
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A change in supply due to other influences
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Increase in supply shifts the curve
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Rightward
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Decrease in supply shifts the curve
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Leftward
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price of a resource used to produce the product rises
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Decreases supply
shift curve left |
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More efficient technologies are used for producing the product
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Increases supply
shift curve right |
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The price of a substitute in production falls
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Increases supply
shift curve right |
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The price of the product is expected to rise
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Decreases supply
shift curve left |
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The number of product producers rise
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Decrease supply
shift curve left |
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The price of a resource to produce falls
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Increases supply
shift curve right |
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price of a complement in production falls
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Decreases supply
shift curve left |
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price of a complement in production rises
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Increase supply
shift curve right |
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price of a substitution in production rises
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Decreases supply
shift curve left |
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price of the product is expected to fall
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Increase supply
shift curve right |
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the number of product producers increase
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Increase supply
shift curve right |
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when is there a shortage
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when a price is below the equilibrium price
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What does a shortage do to the price
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forces the price up
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When is there a surplus
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When a price is above the equilibrium price
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What does a surplus do to the price
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forces the price down
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Generally, what increases supply
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Anything that increases the profit of a product
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Generally, what decreases supply
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Anything that decreases the profit of a product
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How does an increase in demand affect price and quantity
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Shift curve right
Increase Price Increase quantity |
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How does a decrease in demand affect price and quantity
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Shift curve left
Decrease price Decrease quantity |
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How does an increase in supply affect price and quantity?
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Shift curve right
Decrease Price Increase Quantity |
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What does a decrease in supply do to price and quantity
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Shift curve left
Increase price Decrease quantity |
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What happens if both supply and demand increase
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Increases quantity
Price might rise, fall or remain |
