1 Demand, Supply, and Market Equilibrium Free Online FlashCards

What does a demand curve show?

A demand curve shows how much consumers are willing and able to buy at different prices, holding other influences constant.

What is the law of demand?

Other things equal, a higher price leads to a lower quantity demanded, while a lower price leads to a higher quantity demanded.

What does a supply curve show?

A supply curve shows how much producers are willing and able to sell at different prices, holding other influences constant.

What is the law of supply?

Other things equal, a higher price leads to a higher quantity supplied, while a lower price leads to a lower quantity supplied.

How do demand and supply differ from quantity demanded and quantity supplied?

Demand and supply describe whole price–quantity relationships; quantity demanded and quantity supplied are amounts at a particular price.

What is market equilibrium?

Market equilibrium occurs where demand and supply intersect, so the quantity consumers plan to buy equals the quantity producers plan to sell.

What market condition occurs at $4 in the example schedule?

At $4, buyers want 60 items and sellers offer 40, so there is a shortage of 20 items.

What market condition occurs at $6 in the example schedule?

At $6, sellers offer 60 items and buyers want 40, so there is a surplus of 20 items.

What does a change in a good’s own price do to its curve?

A change in the good’s own price causes movement along its existing curve, changing quantity demanded or quantity supplied rather than shifting the curve.

What factors can shift demand?

Demand can shift because of changes in tastes, income, related-goods prices, population, or expectations.

What factors can shift supply?

Supply can shift because of changes in input costs, technology, taxes or subsidies, the number of sellers, or expectations.

How does a demand shift affect equilibrium price and quantity?

With supply unchanged, an increase in demand raises equilibrium price and quantity; a decrease in demand lowers both.