Supply and Demand Flash Cards

TheMoistScholar
Flashcards by , created over 4 years ago

High school/university Economics Flashcards on Supply and Demand Flash Cards, created by TheMoistScholar on 07/21/2015.

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TheMoistScholar
Created by TheMoistScholar over 4 years ago
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Question Answer
What is market equilibrium? A price at which quantity demanded equals quantity supplied.
What is quantity demanded? Ceteris parabus, the amount of something that is demanded at a given price.
What is quantity supplied? Ceteris parabus, the amount of something that suppliers are willing to produce at a given price.
What is demand? The overall relationship between price and quantity demanded. (Think of the demand curve)
What is supply? The overall relationship between price and quantity supplied. (Think of the supply curve)
What is a price ceiling? A government intervention in which it sets a limit price that is below the equilibrium price.
What does a price ceiling do in terms of supply and demand? A price ceiling lowers all possible prices below the equilibrium price which causes demand to increase and supply to decrease, as not many suppliers are willing to lower their prices. This causes excess demand.
Whom is the price ceiling intended to help? The poor. For example, with apartment renting, the government might issue a price ceiling to provide low-cost housing.
What is a price floor? A government intervention in which it sets a minimum price that is higher than the equilibrium price.
What does a price floor do in terms of supply and demand? A price floor raises all possible prices above the equilibrium which causes demand to decrease because of high prices. However, supply will increase because suppliers are more willing to supply at the higher price. This causes excess supply, or a surplus.
Whom does a price support target? Farmers. For example, the U.S. government keeps a price floor on milk, effectively lowering the demand, but the government buys the surplus to aid the farmers. Sometimes the government may even pay farmers not to farm.
What is market price? The price at which a commodity is sold in a given market.