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Terms in this set (40)demand; prices of other goods substitution substitute refers to goods that are rivalry in consumption, when prices of one good rises, consumers will purchase other goods as it is cheaper demand; prices of other goods complementary goods Complimentary goods are goods that go together with other goods.
tastes and preferences the consumers willingness and desire to purchase a good depends on their tastes and preferences Level of disposable income normal goods When real
income of people rises they are able to afford more goods at any price. Normal good is defined as when people's income increases they buy more of that good. Level of disposable income inferior goods Inferior good is defined as when people's income increases they buy less of that good, for instance Iga doughnuts Expectations if people expect demand to change in the future, they may take decisions now, rather than later. Population Factor An increase in population size will increase the demand for all goods, a change in population demographic will change the demand for specific goods. for example Australia has an ageing population leading to an increase in demand for bingo shifting demand right from D1 to D2. other factors Advertising: As there are
advertisements campaigns which increased demand people are encouraged to purchase (Supply) Prices of Other Goods joint Supply this refers to the commodities that can be produced together, an increase in the supply of wool will increase the supply of mutton (Supply) Prices of Other Goods competitive supply this refers to products which use the same resources in their production. an increase in the supply of one would mean having to devote more
resources to that one good and hence less to the other causing the supply for that good to fall Technology Technology is knowledge about
the techniques of production. An improvement in technology will cause the supply to increase. This is because it will lower the cost of production and producers will attain higher profits. Prices of Resources A firm has costs such as wages, salaries and the cost of purchasing inputs. An increase in any of these
costs will result in the firm being willing to supply less of the good at each and every price. expectations of producers Suppliers would supply more of a good at present if they expect the prices to fall in the future. increase in demand (both d & s) an increase in demand shown as a shift right in the demand curve from D1 to D2. This causes an increase in equilibrium price from P1 to P2, and an expansion in supply occurs, increasing equilibrium quantity from Q1 to Q2 decrease in demand (both d & s) a decrease in demand shown as a shift left in the demand curve from D1 to D2. This will occur as income falls due to consumers being less willing and able to demand the good/ service. as a result equilibrium price falls from P1 to P2, and there is a contraction in supply, decreasing equilibrium quantity from Q1 to Q2
increase in supply (both d & s) (improvement in technology) an improvement in tech will reduce costs of production and therefore lead to an increase and shift right in supply from S1 to S2 this causes equilibrium price to fall from P1 to P2 resulting in an expansion in demand and an increase in equilibrium quantity from Q1 to Q2 decrease in supply (both d & s) an increase in the price of Good A, a cost of production for Good B suppliers, would mean suppliers are less willing to supply Good B at every price, this causes a decrease and a shift left in supply from S1 to S2. as a result the price moves from P1 to P2, there is a contraction in demand and equilibrium quantity falls from Q1 to Q2. define demand demand is the willingness and ability of consumers to purchase a good or a service at a given price and at a given point in time Define the Law of Demand the law of demand states that there is an inverse relationship between price and quantity demanded, at higher prices, less quantity is demanded. define supply supply is the willingness and ability of the producers to sell a good and a service at a particular price and at a particular point in time Define Law of Supply the law of supply states that there is a positive relationship between the price and the quantity supplied. at high prices more quantity is supplied define market equilibrium market equilibrium occurs when demands and suppliers come together and exchange a mutually agreeable quantity at a mutual agreeable price. the quantity demanded is equal to the quantity supplied. Define ceteris paribus (if) all else remains unchanged. define tastes and preferences the consumers willingness and desire to purchase a good depends on their tastes and preferences define expectations if people expect demand to change in the future, they may take decisions now, rather than later. Define disposable income after-tax income define market demand it is the summation of all individual consumers consuming Good A in the market define market supply when all the producers sell Good A individual demand how many of Good A one person is able to buy. define individual supply when only one producer sells Good A define shortage a shortage exists when the quantity demanded at Q3 is greater than the quantity supplied at Q2. define surplus a surplus exists when the quantity supplied at Q5 is greater than the quantity demanded at Q4. define income effect when the price of goods rise, it takes up a large portion of consumer income and purchasing power of income falls. consumers purchase less of that good. define substitution effect when the price of other goods falls in comparison, leading consumers to substitute towards the cheaper good and purchase less of the expensive good. (demand) increase in price an increase in the price of the good will cause a decrease in the quantity demanded. this will cause a movement up (contraction) along the demand curve. this is a contraction in the quantity demanded (demand) decrease in price a decrease in the price of the good will cause an increase in the quantity demanded. this will cause a movement down (expansion) the demand curve. this is an expansion in the quantity demanded. (supply) increase in price an increase in the price of a good will cause an increase in the quantity supplied. this will cause a movement up (expansion) the supply curve. this is an expansion in the quantity supplied (supply) decrease in price a decrease in the price of a good will cause a decrease in the quantity supplied. this will cause a movement down (contraction) the supply curve. this is a contraction in the quantity supplied (simultaneous shifts) increase in demand and increase in supply originally the market is at equilibrium (e1) when demand (d1) and supply intersect. equilibrium price is at p1 and equilibrium quantity is at q1. an increase in demand (shift right) from d1 to d2 and an increase in supply (shift right) from s1 to s2 creates a new equilibrium (e2). this causes equilibrium quantity to increase from q1 to q2. the impact on equilibrium price is indeterminate. (simultaneous shifts) increase in demand and decrease in supply originally the market is at equilibrium (e1) when demand (d1) and supply intersect.equilibrium price is at p1 and equilibrium quantity is at q1. An increase in demand (shift right) from d1 to d2 and An decrease in supply (shift left) from s1 to s2 creates a new equilibrium (e2). this causes equilibrium price to increase from p1 to p2. the impact on equilibrium quantity is indeterminate. Recommended textbook solutions Principles of Microeconomics7th EditionN. Gregory Mankiw 830 solutions
Principles of Economics8th EditionN. Gregory Mankiw 1,209 solutions Macroeconomics10th EditionN. Gregory Mankiw 270 solutions Principles of Microeconomics8th EditionN. Gregory Mankiw 796 solutions Sets with similar termsMicroeconomics Ch. 445 terms cs3010 Chapter 4: The Market Forces of Supply & Demand32 terms Jasmine_Richardson9 MICROECONOMICS: Markets55 terms Tomi_Olukokun Sets found in the same folderMicroeconomics Unit 6: The Costs of Production28 terms SuaveShinobi Econ quiz questions29 terms genteranna Economics Factors of Production5 terms mmaus Microeconomics Ch. 438 terms austin_gray57 Other sets by this creatorBarriers to entry7 terms rachelandrawes yr 10 physics 1 major revision28 terms rachelandrawes chemistry major 1 rev31 terms rachelandrawes Economics 138 terms rachelandrawes Verified questionsECONOMICS Suppose the government borrows $20 billion more next year than this year. a. Use a supply-and-demand diagram to analyze this policy. Does the interest rate rise or fall? b. What happens to investment? To private saving? To public saving? To national saving? Compare the size of the changes to the$20 billion of extra government borrowing. c. How does the elasticity of supply of loanable funds affect the size of these changes? d. How does the elasticity of demand for loanable funds affect the size of these changes? e. Suppose households believe that greater government borrowing today implies higher taxes to pay off the government debt in the future. What does this belief do to private saving and the supply of loanable funds today? Does it increase or decrease the effects you discussed in parts (a) and (b)? Verified answer
ECONOMICS "Traveling in Mexico is much cheaper now than it was ten years ago," says a friend. "Ten years ago, a dollar bought 10 pesos; this year, a dollar buys 15 pesos." Is your friend right or wrong? Given that total inflation over this period was 25 percent in the United States and 100 percent in Mexico, has it become more or less expensive to travel in Mexico? Write your answer using a concrete example-such as an American hot dog versus a Mexican taco-that will convince your friend. Verified answer
ECONOMICS In a particular market, there are three commercial television stations, each with its own evening news program from 6:00 to 6:30 P.M. According to a report in this morning’s local newspaper, a random sample of 150 viewers last night revealed 53 watched the news on WNAE, 64 watched on WRRN, and 33 on WSPD. At the .05 significance level, is there a difference in the proportion of viewers watching the three channels? Verified answer
ECONOMICS Define: a. monopolistic market b. barrier to entry c. price searcher d. public franchise e. natural monopoly f. antitrust law Verified answer Other Quizlet setsECON 161 | Chapter 931 terms lexieamira25 Business cycle (14)23 terms griffik3 Microeconomics Final Exam230 terms ars16d L21 terms Ryan_Casey2 Related questionsQUESTION What is meant by the term "Market fundamentalism"? (CM 14) 3 answers QUESTION Because of an increasing population, your school district needs to build a new high school. To get the money it needs, what is the school district most likely to do? 15 answers QUESTION One reason that GDP is not the best measure of social welfare is because it does not include volunteer activities. 8 answers QUESTION Is supply upward or downward sloping? 9 answers What will result in an increase in the supply of Doughnuts?The correct answer is a.) A change in the price of doughnuts. When the prices of doughnuts changes this causes the supply curve to move. A rise in price of doughnuts increases the supply fo doughnuts in the market.
What happens to the price if the demand increases?Demand Increase: price increases, quantity increases. Demand Decrease: price decreases, quantity decreases. Supply Increase: price decreases, quantity increases. Supply Decrease: price increases, quantity decreases.
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What is the effect of an increase in the demand for donuts on the price of a donut and on the quantity of donuts supplied?
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