Ch29: Demand and Supply

• Equilibrium - the point where demand for a product and the supply for the same product are the same. On a graph, the equilibrium is the point of intersection of the demand curve and supply curve.
• Inflation - the increase in the general level of prices over a period of time. Measured by the Consumer Price Index (CPI).

  Causes of Inflation:

  • Demand Pull Inflation / Excess Demand - when demand is larger than supply, prices increase, leading to inflation.
  • Cost Push Inflation / Increased cost of production - when the production cost increases, the business passes on this higher cost onto the consumer, increasing prices, leading to inflation
  • Government Induced Inflation - when the government introduces taxes on goods, ex) cigarettes, prices increase.