Questions and Answers
What causes a demand curve to shift?
The demand curve shifts when some factor of the market changes.
What happens to the demand curve when there is an increase in the number of buyers?
What happens to the demand curve when there is an increase in income for a normal good?
What happens to the demand curve when there is a decrease in income for a normal good?
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How does an increase in the price of a substitute affect the demand curve?
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How does a decrease in the price of a substitute affect the demand curve?
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What effect does an increase in the price of a complement have on the demand curve?
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What happens to the demand curve when there is a decrease in the price of a complement?
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What effect does a preference shift toward a good have on the demand curve?
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What happens to the demand curve when preferences shift away from a good?
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What causes a supply curve to shift?
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What happens to the supply curve when input prices increase?
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What effect does a decrease in input prices have on the supply curve?
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How does cost-saving technology affect the supply curve?
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What happens to the supply curve when there is an increase in the number of sellers?
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What happens to the supply curve in expectation of a change in the market?
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What are the three steps to analyzing changes in Market Equilibrium?
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What happens to the demand curve when a tax is imposed on buyers?
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What happens to the demand curve when a subsidy is applied?
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Study Notes
Shifts in Demand Curve
- Demand curve shifts due to changes in non-price determinants while adhering to the Law of Demand only under "all things being equal."
- An increase in the number of buyers leads to a rightward shift of the demand curve, increasing quantity demanded at each price.
- An increase in income generally shifts the demand curve right for normal goods (more quantity demanded) but left for inferior goods (less quantity demanded).
- A decrease in income shifts the demand curve left for normal goods (less quantity demanded) and right for inferior goods (more quantity demanded).
- If the price of a substitute good increases, the demand curve shifts right as consumers seek the cheaper alternative, increasing quantity demanded.
- Conversely, a decrease in the price of a substitute leads to a leftward shift of the demand curve, reducing quantity demanded for the original good.
- An increase in the price of a complement results in a leftward shift of the demand curve due to decreased quantity demanded of the original good.
- A decrease in the price of a complement shifts the demand curve right, boosting the quantity demanded of the original good.
- A shift in consumer preferences towards a good results in a rightward shift of the demand curve, increasing its quantity demanded.
- Preference shifts away from a good lead to a leftward shift of the demand curve, decreasing quantity demanded.
- Consumer expectations can shift the demand curve right (increase in demand) or left (decrease in demand) based on anticipated market changes.
Shifts in Supply Curve
- Supply curve shifts due to changes in non-price determinants, making the Law of Supply applicable only under "all things being equal."
- An increase in input prices causes a leftward shift of the supply curve, as suppliers can produce less at existing price levels.
- A decrease in input prices results in a rightward shift of the supply curve, enabling suppliers to produce more at existing price levels.
- The introduction of cost-saving technology shifts the supply curve right, as cheaper production enables increased quantity supplied.
- An increase in the number of sellers leads to a rightward shift of the supply curve, as overall quantity supplied increases at each price point.
- Seller expectations regarding market changes can result in a rightward shift (increase in supply) or leftward shift (decrease in supply), affecting how much they are willing to sell.
Market Equilibrium Analysis
- Analyzing changes in market equilibrium involves determining if an event affects the demand or supply curve, identifying the direction of the shift, and utilizing supply/demand diagrams to assess how equilibrium is altered.
Impact of Taxes and Subsidies
- A tax imposed on buyers causes the demand curve to shift downward by the amount of the tax, indicating reduced willingness to pay.
- A subsidy results in an upward shift of the demand curve by the subsidy amount, indicating increased demand for the good.
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Description
Explore the shifts in demand and supply curves with these flashcards. Learn how various factors can influence the market and cause shifts in the demand curve, including changes in the number of buyers. Ideal for students studying basic economic concepts.
