supply and demand

• What are the fundamental forces that drive market economies?

  Supply and demand
• How do supply and demand affect the economy?

  They determine the quantity of goods produced and the prices at which they are sold
• What is a market?

  A market is a collection of buyers and sellers of a particular good or service
• Who determines the demand for a product in a market?

  The buyers
• Who determines the supply of a product in a market?

  The sellers
• What characterizes a competitive market?

  A competitive market has numerous buyers and sellers with negligible impact on market price
• What are buyers and sellers considered in a perfectly competitive market?

  Price takers
• What does the law of demand state?

  The quantity demanded decreases as the price increases
• What does the demand curve illustrate?

  The relationship between price and quantity demanded
• What happens to the demand curve when there is an increase in demand?

  The curve shifts to the right
• What factors can influence shifts in the demand curve?

  Income, prices of related goods, tastes, expectations, and the number of buyers
• What does the law of supply state?

  The quantity supplied increases as the price increases
• What happens to the supply curve when there is an increase in supply?

  The curve shifts to the right
• What factors can influence shifts in the supply curve?

  Input prices, technology, expectations, and the number of sellers
• What determines the equilibrium price and quantity in a market?

  The interaction of supply and demand
• What occurs when the price is above equilibrium?

  A surplus exists, leading to downward pressure on prices
• What occurs when the price is below equilibrium?

  A shortage exists, leading to upward pressure on prices
• What are the key characteristics of a perfectly competitive market?

  • Numerous buyers and sellers
  • Identical goods
  • No individual influence on price
  • Buyers and sellers are price takers
• What are the effects of shifts in the demand curve?

  • Increase in Demand: Shift to the right, higher quantity demanded at every price
  • Decrease in Demand: Shift to the left, lower quantity demanded at every price
• What are the effects of shifts in the supply curve?

  • Increase in Supply: Shift to the right, higher quantity supplied at every price
  • Decrease in Supply: Shift to the left, lower quantity supplied at every price
• What happens at market equilibrium?

  • Quantity supplied equals quantity demanded
  • No pressure for price to change
  • Market is in balance
• What are the conditions of surplus and shortage in a market?

  • Surplus: Quantity supplied > Quantity demanded, leading to downward pressure on prices
  • Shortage: Quantity demanded > Quantity supplied, leading to upward pressure on prices
• What are the fundamental forces that drive market economies?

  Supply and demand
• How do supply and demand affect the economy?

  They determine the quantity of goods produced and the prices at which they are sold
• What is a market?

  A market is a collection of buyers and sellers of a particular good or service
• Who determines the demand for a product?

  The buyers
• Who determines the supply of a product?

  The sellers
• What characterizes a competitive market?

  A competitive market has numerous buyers and sellers with negligible impact on market price
• What are buyers and sellers considered in a perfectly competitive market?

  Price takers
• What does the law of demand state?

  The quantity demanded decreases as the price increases
• What does the demand curve illustrate?

  The relationship between price and quantity demanded
• What happens to the demand curve when there is an increase in demand?

  The curve shifts to the right
• What factors can influence shifts in the demand curve?

  Income, prices of related goods, tastes, expectations, and the number of buyers
• What does the law of supply state?

  The quantity supplied increases as the price increases
• What happens to the supply curve when there is an increase in supply?

  The curve shifts to the right
• What factors can influence shifts in the supply curve?

  Input prices, technology, expectations, and the number of sellers
• What determines the equilibrium price and quantity in a market?

  The interaction of supply and demand
• What occurs when the price is above equilibrium?

  A surplus exists, leading to downward pressure on prices
• What occurs when the price is below equilibrium?

  A shortage exists, leading to upward pressure on prices
• What are the key characteristics of a perfectly competitive market?

  • Numerous buyers and sellers
  • Identical goods
  • No individual influence on price
  • Buyers and sellers are price takers