Quantity demanded is the quantity of a good or service that consumers are willing and able to buy at a given price.
Quantity supplied is the quantity of a good or service that a firm is willing and able to supply at a given price.
Determinants of PES (TICCS)
Time: to adjust to new prices
Inventory: ability to store products for a period of time
Costs: of factors of production
Capacity: how much spare capacity to produce left?
Substitutes: how easily can factors of production be substituted?
Determinants of Supply (ROTTEN)
Resource costs
Other goods' prices
Taxes and subsidies
Technological changes
Expectations of producers (regarding future prices)
Number of sellers
Determinants of Demand (TRIBES)
Tastes and preferences
Related goods (regarding their prices)
Income of consumers
Buyers (number of)
Expectations of consumers (regarding future prices)
Special circumstances
Subsidy
A payment from the government to the producers for each unit produced to encourage output or reduce costs of production.
Direct provision
When goods and services are supported by the government deemed to be in the best interest of the public
Price elasticity of demand (PED)
responsiveness of quantity demanded to a change in price
Price elasticity of supply (PES)
responsiveness of quantity supplied to a change in price
Demand
How much of a good or service people are willing and able to buy in a given time period
The law of demand states that there is an inversely proportional relationship between quantity demanded and price. As price increases, quantity demanded decreases. Vice versa.
Normal goods
Products that are bought more frequently as a consumer's income increases.
Inferior goods
Products that are bought more frequently as a consumer's income decreases.
Complements
Products that are commonly bought together such as phones and chargers.
Substitutes
Products that can replace one another such as a metal fork and a plastic fork.
Supply
How much of a good or service firms are willing and able to sell in a given time period
The law of supply states that there is a positive relationship between quantity supplied and price. As price increases, quantity supplied increases. Vice versa.
Income elasticity of demand (YED)
The responsiveness of quantity demanded due to a change in real income of consumers
