2 Shifts in Demand and Supply Free Online FlashCards

What does a shift in demand mean?

A shift changes the quantity buyers are willing and able to purchase at every price, because a non-price determinant of demand has changed.

Does a good’s own price change shift its demand curve?

A change in the good’s own price causes movement along the existing curve, not a shift of the curve.

How does higher income affect demand for a normal good?

For a normal good, higher income increases demand.

What happens to demand when the price of a substitute rises?

If the price of a substitute rises, demand for this good tends to increase.

How does a rise in a good’s popularity affect its demand curve?

Greater popularity increases demand and shifts the demand curve to the right.

How do higher production input costs affect supply?

Higher input costs generally reduce supply; lower input costs generally increase it.

How does improved production technology generally affect supply?

Technology that makes production more efficient generally increases supply.

How do production taxes and subsidies affect supply?

Production taxes tend to decrease supply, while subsidies tend to increase it.

How can a drought affect the supply of wheat?

A drought can reduce agricultural supply, shifting the supply curve left.

What happens to equilibrium price and quantity when demand increases?

A rightward demand shift raises both equilibrium price and equilibrium quantity.

What happens to equilibrium price and quantity when supply increases?

A rightward supply shift lowers equilibrium price and raises equilibrium quantity.

What happens to wheat’s equilibrium when drought reduces its supply?

A leftward supply shift raises equilibrium price and lowers equilibrium quantity. A drought-reduced wheat harvest is an example.