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11 Cards in this Set
- Front
- Back
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Market Forces of Supply and Demand |
Supply and demand are the forces that make market work. Supply and demand determines the quality of each good produced and the price at which it is sold. |
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Price |
Price is different from cost. Price is the amount of money a buyer must give up acquiring something |
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Cost |
Cost refers to payment to factor input in production |
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The supply curve: The relationship between price and quantity supplied |
The quantity supplied of any good or service is the amount that sellers are willing and able to sell. When the price of rape seed is high, selling rape seed is profitable, and so sellers are willing to plant rape. When the price of rape seed is low, the business is less profitable, and so growers are less willing to plant rape |
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Quantity supplied |
At a low price, some growers may even choose to shut down, and their quantity supplied falls to zero because the quantity supplied rises as the price rises. And the quantity supplied falls as the price falls. We can say that the quantity supplied is positively related to the price of the good |
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Law of supply |
The quantity supplied rises as the price rises, and the quantity supplied falls as the price falls. This relationship is between price and quantity is called law of supply. Price is on the X axis and quality supplied is on the Y axis. As the prices rises, it is willing to supply a greater and greater quantity. This is supply schedule. |
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Supply schedule |
Is a table showing the relationship between the price of a good and the quality supplied, holding constant everything else that influences how much producers of the good want to sell |
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Supply Curve |
The curve relating price and quantity supplied is called the supply curve. The supply curve slopes upwards because, other thins being equal, a higher price means a greater quantity supplied. The upward sloping line relating price and quantity supplied is called supply curve |
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Market Supply versus Individual Supply |
Market supply is the sum of the supplies of all sellers. The market supply is the sum of the two individual supplies. We sum individual supply curves horizontally to obtain the market supply curve. The market supply curve shows how the total quantity supplied varies as the price of the good varies. The market supply will be the amount all producers in the market are willing to offer for sale at each price |
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Shifts versus movement along the supply curve |
A shift in the supply curve is caused by a factor affecting supply other than a change in its price. The shift in the supply curve is referred to as an increase or decrease in supply. A movement along the supply curve occurs when there is a change in price assuming other factors affecting supply held constant. This may occur because of a change in demand conditions. A change in price leads to a movement along the supply curve and is referred to as a change in quantity supplied |
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Shifts in the supply curve |
Any change that raises the quantity that sellers are willing to produce and offer for sale at a given price shifts the supply curve to the right (is called an increase in supply). Any changes that lowers the quantity that sellers are willing to produce and offer for sale at a given price shifts the supply curve to the left (is called a decrease in supply) |
