Demand:
The quantities that people are willing and able to buy at various prices.
The Law of Demand:
There is an inverse relationship between price and quantity demanded.
- If one increases, the other one decreases.
Δ in price
what causes a change in demand?
- Δ in buyer's taste ( advertisement)
- Δ in the number of buyers (population)
- Δ in income ( normal v inferior goods)
- Δ in the price of related goods (complementary and substitute goods)
- Δ in expectations
Supply:
The quantities that producers or sellers are willing and able to produce/sell at various prices.
The Law of Supply:
There is a direct relationship between price and quantity supplied.
what causes a " change in quantity supplied"?
Δ in price
What causes a change in supply?
- Δ in the number of sellers ( suppliers, producers)
- Δ in the cost of production
- Δ in technology
- Δ in weather
- Δ in taxes or subsidies
- Δ in expectations
Excess Demand:
Quantity demanded is greater than quantity supplied. (QD>QS)
- Results in a shortage.
- Where consumers cannot get the quantities or items they desire.
Price Ceiling:
Creates shortages.
- (Found below the equilibrium point)
Price floors
legal minimum price meant to help sellers
Equilibrium Point:
This is the point at which the supply curve and the demand curve intersect.
The four consequences of having a low price ceiling and the four consequences of having a low price floor is not in your notes.
ReplyDeleteCan you elaborate more on what increases and decreases on supply and demand and what an inverse and direct relationship means. I understand the concept but anyone trying to understand supply and demand for the first time wouldn't. Overall this a great post.
ReplyDeleteIt would be good to notate that the price ceiling is meant to help the buyers.Also it would be good to include the consequences of either price floor or ceiling. Other than that, you have a spectacular post!
ReplyDelete