Unit 2 - Supply and Demand Guide

measures how sensitive are sellers to price changes on goods.

as the price of a good increases, consumers substitute the good with another that is cheaper.

gives an owner the right to supply a good /service.

transactions that should occur, but dont because of government intervention (calculate the area= triangle formula, ½ (base x height)

upper limit of a quantity that can be bought or sold (known as quantity control)

are the opposite of taxes and help reduce price per unit.

increase in demand when consumers income decreases

occurs when no one is better off doing something else.

good /service that can be used in place of another, when price of one increases, consumers will buy more of the other (ex.

goods /services that are consumed together (ex.

The cost of production (land, labor, capital) has a(n) ________ on the supply.

Flat, quantity is sensitive to price change, substitutes, luxury items, ________ of income, not needed immediately.

how much the Q is affected by P.

tax placed on a good that is imported or exported.

difference between demand price and supply price.

= compliments (inferior good)

= substitutes (normal good)

Qs <Qd, price is lower than equilibrium.

either price or quantity will be unknown.

are added up to the unit cost of production, thus making it more expensive.

means that the goods are subject to be affected by a change in price.

TR correlates direct with price.

increase in demand when consumers income increases (ex.

The ________ shows the quantity a supplier is willing and able to offer at various prices at a given time.

TR correlates inversely with price.

means that goods are not subject to be affected by a change in price.

the quantity which a consumer/buyer are willing and able to buy at different prices

As price increases, demand decreases, and as price decreases, demand increases

good/service that can be used in place of another, when price of one increases, consumers will buy more of the other (ex

as the price of a good increases, consumers substitute the good with another that is cheaper

goods/services that are consumed together (ex

as income increases, people will buy more of normal goods, and less of inferior goods

increase in demand when consumers income increases (ex

increase in demand when consumers income decreases (ex

As more units of a product are consumed, the satisfaction/utility it provides tends to decline

different quantities of goods/services which sellers are willing and able to produce at a given price

as price increases, quantity supplied also increases, this is a direct relation

TR correlates direct with price

how much the Q is affected by P

measures how sensitive are sellers to price changes on goods

unable to respond to price change

occurs when no one is better off doing something else

actual price -price the producer is willing to sell for

price and quantity increase

price and quantity decrease

price decreases, quantity increases

price increases, quantity decreases

either price or quantity will be unknown

transactions that should occur, but dont because of government intervention (calculate the area = triangle formula, ½(base x height)

minimum price a supplier can charge, price is set above equilibrium (causes shortage)

maximum price a supplier can charge, price is set below equilibrium (causes surplus)

upper limit of a quantity that can be bought or sold (known as quantity control)

gives an owner the right to supply a good/service

the price at which consumers will demand that quantity

the price at which producers will supply that quantity

difference between demand price and supply price

tax placed on a good that is imported or exported

restriction on the quantity of a good that can be imported