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Study and Demand
Flashards to use to study!
| Question | Answer |
|---|---|
| What is the Law of Demand? | The Law of Demand states that, all else being equal, as the price of a good or service increases, the quantity demanded decreases, and vice versa. This is because consumers tend to buy less of a good when its price rises and more when its price falls. |
| What is the Law of Supply? | The Law of Supply states that, all else being equal, as the price of a good or service increases, the quantity supplied increases, and vice versa. Suppliers are more willing to produce and sell a good at higher prices because they can earn more revenue. |
| What are the five main shifters of demand? | Income, Preferences,Prices of Related Goods, Expectations, Number of Buyers |
| What are one of the 5 main shifters of supply and explain? | Expectations: If producers expect future prices to rise, they may reduce current supply to sell at higher future prices. |
| What is a subsidy? Explain | A subsidy is a payment made by the government to producers to encourage the production or consumption of a good or service. Subsidies lower production costs, which can lead to an increase in supply and a reduction in price for consumers. |
| Why does price not shift the demand or supply curve? | Price does not shift the demand or supply curve because it only causes a movement along the existing curve, not a shift in the curve itself. A shift in the demand or supply curve is caused by factors like income, preferences, technology, or input prices. |
| Whats a real world example of Shortage? | In the early stages of the COVID-19 pandemic, there was a shortage of hand sanitizers and face masks as demand surged, but supply could not meet the increased demand due to manufacturing and supply chain disruptions. |
| Whats a real world example of Surplus? | After the 2008 financial crisis, there was a surplus of unsold homes in many markets due to a drop in consumer demand, as housing prices had been set too high and many people could no longer afford them. |
| Explain Surplus? | A surplus occurs when the quantity supplied of a good exceeds the quantity demanded at a given price. This typically happens when the price is set above the equilibrium price, leading producers to supply more than consumers are willing to buy. |
| Explain Shortage? | A shortage occurs when the quantity demanded of a good exceeds the quantity supplied at a given price. |
Created by:
metzger5
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