What variables affect the quantity demanded?
price of the productconsumer's incomeprice of substitute goodsprice of complementary goodsconsumer's preferences or tastes and advertising that may influence preferencesconsumer's expectations about future prices
demand schedule
shows how the quantity demanded by an individual changes with the price, ceteris paribus
What are the variables held fixed in a demand schedule?
consumer's incomeprices of substitutes and complementsconsumer's tastesconsumer's expectations about future prices
Individual Demand Curve
shows the relationship between the price and the quantity demanded by an individual consumer, ceteris paribus
Law of Demand
there is a negative relationship between price and quantity demanded, ceteris paribus
Change in Quantity Demanded
a change in the quantity a consumer is willing to buy when the price changesa movement along the demand curve caused by a change in price
Market Demand Curve
shows the relationship between price and quantity demanded by all consumers, ceteris paribusthe horizontal sum of the individual demand curvesnegatively sloped, reflecting Law of Demand
A change in price causes movement along a demand curve and a change in ____________.
the quantity demanded
quantity supplied
the amount of a product that firms are willing and able to sell
What are the variables that determine quantity supplied?
price of productwage paid to workersprice of materialscost of capitalstate of production technologyproducers' expectations about future pricestaxes paid to the govt or subsidies
Supply Schedule
table that shows the relationship between the price of a product and quantity supplied, ceteris paribus
What are the variables held fixed in a supply schedule?
input coststechnologyprice expectationsgovt taxes or subsidies
individual supply curve
shows the relationship between price and quantity supplied by a single firm, ceteris paribus
law of supply
there is a positive relationship between price and quantity supplied, ceteris paribus
change in quantity supplied
a movement along a single supply curvea change in the quantity a producer is willing and able to sell when the price changes
minimum supply price
lowest price at which a product is supplied
Why is the Individual Supply Curve positively sloped?
shows the marginal cost of production for different quantities produced
market supply curve
shows the relationship between market price and quantity supplied by all firms, ceteris paribus
Why is the Market Supply Curve positively sloped?
shows the marginal cost of production for different quantities produced
market equilibrium
when quantity demanded = quantity supplied at the prevailing market pricethe intersection of the supply and demand curves
excess demand
when quantity demanded exceeds quantity suppliedwhen price is less than equilibrium pricecauses price to risesometimes called a shortageeliminated by an increase in price
As price increases, what are the two reasons that excess demand shrinks?
market moves upward along demand curve, decreasing quantity demandedmarket moves upward along supply curve, increasing quantity supplied
In some cases, govt creates an excess demand for a good by setting a ____________ -- sometimes called a price ceiling.
maximum price
If the maximum price set by the govt is less than the equilibrium, the result is a ___________________ for the good.
permanent excess demand
excess supply
when quantity supplied exceeds quantity demandedwhen price is greater than equilibrium priceproducers are willing to sell more than consumers are willing to buycauses the price to dropsometimes called a surplus
What are the two reasons for why the excess supply would shrink?
market moves downward along the demand curve, increasing the quantity demandedmarket moves downward along supply curve, decreasing quantity supplied
Sometimes, the govt creates an excess supply by setting a ____________ -- sometimes called a price floor
minimum price
If the minimum price set by the govt is greater than the equilibrium price, what is the result?
permanent excess supply
An excess demand for a product will cause the price to _________. As a consequence of the price change, the quantity demanded will ____________ and the quantity supplied will ____________.
increasedecreaseincrease
Excess supply of a product will cause the price to _________. As a consequence of the price change, the quantity demanded will __________, and the quantity supplied will __________.
decreaseincreasedecrease
A minimum price above the equilibrium price generates excess _____.
supply
change in demand
a shift of the demand curve caused by a change in a variable other than the price of the product
Increases in demand shift the demand curve to the ______.
right
What factors cause increases in demand?
when income increases (normal good)when income decreases (inferior good)when substitute good price increaseswhen complementary good price decreaseswhen population increaseswhen consumer preferences for good increaseswhen expected future price increases
Decreases in demand shift the demand curve to the _____.
left
What factors cause decreases in demand?
when income decreases (normal good)when income increases (inferior good)when substitute good price decreaseswhen complementary good price increaseswhen population decreaseswhen consumer preferences for good decreasewhen expected future price decreases
A decrease in demand __________ the equilibrium price.
decreases
A decreases in demand causes excess ________, which causes downward pressure on the price.
supply
A change in demand causes a _______ the demand curve.
shift of
An increase in demand for a product ________ the equilibrium price and ________ the equilibrium quantity.
increasesincreases
change in supply
a shift of the supply curve caused by a change in a variable other than the price of the product
Increases in supply shift the supply curve ________________.
downward and to the right
What are the factors that cause an increase in supply?
when wage decreaseswhen price of materials/capital decreaseswhen technological advances increasewhen govt subsidies increasewhen expected future prices decreasewhen number of producers increases
An increase in supply __________ the equilibrium price
decreases
Decreases in supply shift the supply curve ______________.
upward and to the left
What are the factors that result in a decrease in supply?
when wage increaseswhen price of materials/capital increaseswhen tax increaseswhen expected future price increaseswhen number of producers decreases
A decrease in supply ____________ the equilibrium price.
increases
When both demand and supply increase, the equilibrium quantity will increase because _______.
both changes tend to increase the equilibrium quantity
When both demand and supply decrease, the equilibrium quantity will fall because _________
both changes tend to decrease the equilibrium quantityeffect on equilibrium price depends on which change is larger
A change in supply causes a __________ the supply curve.
shift of
A decrease in the supply of a product ________ the equilibrium price and _______ the equilibrium quantity.
increasesdecreases
If both demand and supply decrease simultaneously, the equilibrium price will increase if the change in ________ is relatively large.
supply
If both demand and supply increase simultaneously, the equilibrium price will increase if the change in ________ is relatively large.
demand
If supply increases while demand decreases, the equilibrium price will _______.
decrease
If supply increases while demand decreases, the equilibrium quantity will increase if the change in __________________ or if ______________.
demand is relatively smallthe change in supply is relatively large
When demand changes and the demand curve shifts, price and quantity change in __________.
the same direction
When supply changes and the supply curve shifts, price and quantity change in _____________.
opposite directions