Create
Learn
Share

Chapter 2 - The Basics of Supply & Demand

rename
pranitsingh524's version from 2016-09-11 19:17

Section

 

Question Answer
what is supply-demand analysis?a fundamental and powerful tool that can be applied to a wide variety of interesting and important problems.
what is the supply curve?Relationship between quantity of a good that producers are willing to sell and the price of a good
what is the demand curve?Relationship between quantity of a good that consumers are willing to buy and the price of the good
what are substitutes?two goods for which an increase in the price of one leads to an increase in the quantity demanded of the other
what are complements?Two goods for which an increase in the price of one leads to a decrease in the quantity demanded of the other
what is the Equilibrium/Market-Clearing Price?Price that equates the quantity supplied to the quantity demanded
what is market mechanism?Tendency in a free market for price to change until the market clears
what is surplus?Situation in which the quantity supplied exceeds the quantity demanded
what is shortage?Situation in which the quantity demanded exceeds the quantity supplied
in the supply curve, is there a direct or inverse relationship?direct
in the demand curve, is there a direct or inverse relationship?inverse
when you hear the word "buy" you should think of?demand
when you hear the word "sell" you should think of?supply
are consumers demand or supply?demand
are producers demand or supply?supply
what kind of relationship do substitutes have?direct
what kind of relationship do complements have?inverse
memorize

 

Question Answer
what is the equation of the supply curve? what does it tell us?Qs = Qs(P) ; a relationship between the quantity supplied and the price.
what is the equation of the demand curve? what does it tell us?Qd = Qd(P) ; relationship between quantity demanded and price
memorize

 

Draw the supply curve & understand it well.
Draw the demand curve & understand it well.

 

Question Answer
what happens to the market when the supply curve shifts to the right?the price goes down and quantity demanded goes up
what happens to the market when the demand curve shifts to the right?the price goes up and the quantity demanded goes up
why do supply and demand curves shift?because market conditions change
what 2 things determine changes in price and quantity?amount by which each curve shifts & the shape of each curve
memorize

Recent badges