Questions and Answers
What is demand?
How much is demanded at every given price; a graphical representation of the demand schedule which slopes downward.
What is quantity demanded?
The amount demanded at a given price.
What are substitutes in consumption?
Two goods are substitutes if a decrease in the price of one good causes a decrease in demand for the other.
What are complements in consumption?
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What is a normal good?
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What is an inferior good?
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What is supply?
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What is quantity supplied?
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What are substitutes in production?
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What are complements in production?
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What is equilibrium?
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What is equilibrium price?
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What is equilibrium quantity?
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What is a surplus?
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What is a shortage?
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Study Notes
Demand
- Demand reflects the relationship between price and the quantity demanded at various price levels, illustrated with a downward-sloping curve.
- Quantity demanded refers to the specific amount consumers are willing to buy at a fixed price.
Substitutes and Complements
- Substitutes in consumption allow consumers to switch between goods; a price drop in one can lead to decreased demand for the other.
- Complements in consumption mean that a price decrease for one good can increase the demand for another good that is consumed together.
Normal and Inferior Goods
- Normal goods see a decrease in demand when consumer income falls; consumers buy less.
- Inferior goods experience an increase in demand when income declines; consumers opt for these cheaper alternatives.
Supply
- Supply indicates how much producers are prepared to sell at different price points, represented by an upward-sloping curve.
- Quantity supplied varies with price, indicating the amount a supplier will offer for sale at a specific price.
Production Relationships
- Substitutes in production imply that when the price of one good rises, suppliers shift resources to produce more of that good and less of the alternative.
- Complements in production suggest that increased prices for one good can drive up production levels for both related goods.
Market Equilibrium
- Market equilibrium is achieved when quantity demanded equals quantity supplied.
- Equilibrium price is the specific price point where supply and demand meet.
- Equilibrium quantity denotes the number of units sold at the equilibrium price.
Surplus and Shortage
- A surplus occurs when the quantity supplied exceeds quantity demanded, leading to excess supply.
- A shortage arises when quantity demanded surpasses quantity supplied, creating excess demand.
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Description
Test your knowledge on key concepts of supply and demand with these flashcards. This quiz covers essential terms such as demand, quantity demanded, and substitutes in consumption, ensuring a solid understanding of economic principles. Perfect for students studying Economics.
