Demand

• Demand


  The willingness and ability to purchase a good or service at a price and time
• Law of demand


  • When price rises, demand will fall
  • When prices fall demand will increase
• Determinants of Demand


  • Product or service prices
  • Buyer's income
  • Prices of substitute goods
  • Consumers preferences
  • Consumer expectations
• Quantity demanded


  The total number of units purchased at that price
• Demand curve


  Shows the relationship between price and quantity demanded
• Extension of demand


  A rise in quantity demanded
• Contraction of demand


  A fall in quantity demanded
• Supply


  The quantity of a good/service that a firm is willing and able to produce at a particular price and at a particular time
• Determinants of Supply


  • Price of the good
  • Cost of Production
  • Technology
  • Number of Producers
  • Prices of Related Goods
• Law of supply


  • The quantity supplied increases as the price of the good increases, indicating a positive relationship between price and quantity supplied
• Market equilibrium


  Where demand is equal to supply, represented where demand curve meets with the supply curve
• Market


  Where buyers and sellers meet to exchange money for goods
• Price mechanism


  How supply and demand interact to set the market price and amount of goods sold
• Disequilibrium


  When quantity demanded does not equal quantity supplied, creating either a shortage or a surplus
• Market shortage


  The demand for a good is greater than it's supply
• Market surplus


  The supply of a product is greater than its demand
• Price ceiling


  Protects consumers from high prices, implemented below the equilibrium point
• Price floor


  Protects firms from low/no profits, implemented above the equilibrium point
• What does Ceteris Paribus mean

  Other things being equal or remaining constant.