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50 Cards in this Set

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