Supply/demand Study Guide

Front 1

define supply

Back 1

controlld by producer. it is that which is available for sale

Front 2

When increases in supply occur

Back 2

1. new discovery
2. increased production or efficiency
3. Transfer use of existing product
4. New Company enter market

Front 3

When decreases in the supply occur

Back 3

1. recall withdraw
2. destruction of merchandise
3. Product withdrawn by manufacturer
4. firm exits market

Front 4

Supply curve behavior

Back 4

increases to the right
decreases to the left

Front 5

define demand

Back 5

controlled by consumer. It is desire coupled with the ability to buy.

Front 6

when demand increases

Back 6

1. ads, promotion
2. new use for established product
3. improved product, new appeal
4. substitute use
5. taxes go down

Front 7

when demand decreases

Back 7

1. bad press
2. end of a fad
3. duplicate product starts to compete
4. other is better bargain
5. taxes go up

Front 8

demand curve behavior

Back 8

increases to the right, decreases to the left

Front 9

define elasticity

Back 9

change in price causes shift in demand

Front 10

define inelasticity

Back 10

price change causes little or no shift in demand

Front 11

equilibrium

Back 11

the quantity consumers are willing and able to buy equals the quantity producers are willing and able to sell

Front 12

surplus

Back 12

at a given price, the amount by which quantity supplied exceeds quantity demanded; a surplus usually forces down the price

Front 13

shortage

Back 13

at agiven price, the amount by which the quantity demanded exceeds quantity supplied; a shortage usually forces the price up

Front 14

transaction costs

Back 14

the cost of time and information needed to carry out market exchange