Economics - Supply and demand (CHAPTER 3)
What is supply?
The quantity of a good or service that producers are willing and able to sell at various prices during a given time period.
What is demand?
The quantity of a good or service that consumers are willing and able to buy at various prices during a given time period.
What is equilibrium price?
The price at which the quantity demanded of a good or service equals the quantity supplied.
What is shortage?
A situation in which the quantity demanded of a good or service exceeds the quantity supplied in a market.
What is surplus?
A situation in which the quantity supplied of a good or service exceeds the quantity demanded in a market.
What is a price ceiling?
A legally established maximum price for a good or service.
What is a price floor?
A legally established minimum price for a good or service.
What is elasticity of demand?
A measure of how responsive quantity demanded is to a change in price.
What is elasticity of supply?
A measure of how responsive quantity supplied is to a change in price.
What is ceteris paribus?
A Latin phrase meaning 'all other things being equal'.
What is the supply curve?
It shows the quantity of a good that producers are willing and able to sell at different prices.
What is the difference between the individual and market supply curve?
The individual supply curve shows the supply of one producer, while the market supply curve is the sum of all individual supply curves.
Which variable(s) expresses a movement along the supply curve?
Price of the good.
Which variable(s) expresses the shift of the supply curve?
Input prices.
Technology of production.
Price of related goods and services.
Physical supply of a natural resources.
What is the law of supply?
If the price increases, the quantity supplied increases.
What is the demand curve?
It shows the quantity of a good that consumers are willing and able to buy at different prices.
What is the difference between the individual and market demand curve?
The individual demand curve shows the quantity demanded by one consumer, while the market supply curve is the sum of all individual demand curves.
Which variable(s) expresses a movement along the demand curve?
Price of the good.
Which variable(s) expresses the shift of the demand curve?
Price of related goods and services.
Buyers' income.
Buyers' taste.
Buyers' expectation about the future (buying in the present, because of a future increase in price of a good).
What are substitute goods?
The increase in the price of one good leads to an increase in the quantity demanded of the other good.
What are complementary goods?
The increase in the price of one good leads to a decrease in the quantity demanded of the other good. They are often used together.
Does market adjustment in a free market tend to reach the equilibrium by increasing or decreasing the price when confronting a shortage or surplus, in a free market?
Yes.
An increase in supply leads to :
Decrease of equilibrium price and increase of equilibrium quantity.