Economics Unit 3: Supply and Demand Flashcards

Questions and Answers

Describe the operations of the law of supply and demand.

The law of demand states that at higher prices, buyers demand less of an economic good, while the law of supply states that at higher prices, sellers supply more of an economic good. These two laws interact to determine market prices and goods traded.

Explain how competition between buyers and sellers affects the price as well as quality and quantity of supply.

Competition among sellers lowers costs and prices, encouraging more production, while competition among buyers raises prices, allocating goods to those willing to pay most.

Predict how changes in supply and demand affect price and quantity sold.

If demand increases and supply remains unchanged, equilibrium price and quantity will go up. If demand decreases, likewise supply unchanged, the opposite occurs.

Identify and analyze the various noneconomic factors that can influence price.

Factors include culture, religion, class and family, tradition, individual roles, socio-political dependencies, government roles, and societal dualities. Signup and view all the answers

Demonstrate an understanding of the effects of production and distribution networks on price and productivity.

Lower production costs increase the quantity producers supply at a given price. Manufacturers can command higher profits by removing intermediaries from distribution. Signup and view all the answers

Describe the different economic concepts that apply to different goods and services.

Economic concepts include value/utility, scarcity, transferability, wealth, and optimization. Signup and view all the answers

Demonstrate how consumer behavior defines and alters demand, and explain the effects of changing demand on supply and productivity.

Low consumer demand leads to surplus and lower prices, while high demand causes prices to rise and productivity to increase. Signup and view all the answers

What does supply and demand influence, vice versa?

Supply and demand influence price, and price influences supply and demand. Signup and view all the answers

What is the law of supply and demand?

The law of supply and demand states that the price of any good adjusts to balance the quantity supplied and the quantity demanded. Signup and view all the answers

Study Notes

Law of Supply and Demand

Law of demand: as prices increase, demand for goods decreases.
Law of supply: as prices increase, the quantity supplied of goods also increases.
Market prices and traded volumes are determined by the interaction of supply and demand.

Competition Among Buyers and Sellers

Seller competition leads to lower prices and increased production of desirable goods.
Buyer competition raises prices and allocates goods to those willing to pay more.
Surplus occurs when supply exceeds demand, resulting in decreased prices.
Shortage occurs when demand exceeds supply, leading to increased prices.

Impact of Changes in Supply and Demand

Increased demand with unchanged supply results in higher equilibrium prices and quantity sold.
Decreased demand with unchanged supply leads to lower equilibrium prices and quantity sold.

Noneconomic Factors Influencing Price

Cultural, religious, and traditional impacts can influence pricing.
Class and family roles contribute to price perception.
Socio-political dependencies and government roles also play a part in pricing.

Production and Distribution Networks

Decrease in production costs (labor, materials, equipment) encourages greater supply at given prices.
Lower-cost producers can offer more products compared to higher-cost producers.
Distribution channel choices affect pricing, with direct channels often leading to higher profit margins.

Value/Utility: Represents exchange power between goods/services; example: one pen equals two pencils.
Scarcity: Only goods with limited availability relative to demand possess value; free goods like air lack value.
Transferability: Goods need to be transferable to have value-in-exchange.
Wealth: Comprises valuable items that exhibit utility, scarcity, and transferability.
Optimization: Involves the efficient utilization of resources to maximize or minimize certain outcomes.

Consumer Behavior and Demand

Consumer demand directly affects supply; low demand leads to surpluses and price drops, while high demand causes shortages and price increases.
Producers adjust production levels based on consumer behavior responses.

Interaction of Supply and Demand

Supply and demand influence pricing, while price adjustments affect supply and demand dynamics.
This reciprocal relationship is foundational to economic understanding, termed the law of supply and demand.

Definition of the Law of Supply and Demand

Claims that prices adjust to align the quantity supplied with the quantity demanded, achieving market balance.

Description

Dive into the fundamental concepts of supply and demand with this quiz based on Economics Unit 3. Learn how these laws interact to influence market prices and the quantity of goods traded. Perfect for students looking to reinforce their understanding of these core economic principles.