Questions and Answers
Who is the father of economics?
Adam Smith
He invented invisible hand
Adam Smith
It illustrates how individuals pursuing their own self interest in a free market can unintentionally benefit society
Invisible hand
Companies constantly compete to innovate and improve products like smartphone or software
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Farmers and food producers are guided by consumers demand for fresh produce
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Refers to the overall deserve or willingness of consumers to purchase a good or services
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It is the specific amount of a good or services that consumers are willing to buy at a particular price point during a given period
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The demand curve is _____ because as the price of the product decreases consumer are willing to buy more of it
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Price and quantity demanded have an inverse relationshipprice and quantity demanded have an inverse relationship
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When demand shifted to the ____ more consumers are willing to purchase the product at various price levels
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When demand ships to the ____ you were consumers are willing to purchase a product at a various price level
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Quantity supplied is the specific amount of a product that is producers are willing to sell at a particular price point
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Supply is not the overall relationship between the price of a product and the amount producers or willing to sell.
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The supply curve is upward sloping because as the price of the product increases producers are willing to supply more of it
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In law of supply price and quantity supplied have direct relationship
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When supply shifts to the ____ increased supply causes the supply curve to ship to the right lowering prices and increasing output.
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When supply decreases the supply curve moves to the ____ raising prices but lowering output
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It is the point where the quantity of a good or service are demanded by consumers meets the quantity supplied by producers at a specific price
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It occurs when the quantity demanded exists the quantity supplied at a given price
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Occurs when the quantity supplied exceeds the quantity demanded at a given price
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Adam smith was the first to use the term invisible hand to describe the natural regulation of markets
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Through the invisible hand market prices don't act as signals to allocate resources efficiently by reflecting supply and demand conditions.
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When the price is set above the market equilibrium it leads the producers to produce more than what consumers are willing to buy.
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Invisible hand describes how through this self interested actions, the market naturally reaches an equilibrium.
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Study Notes
Father of Economics
- Adam Smith is known as the father of economics for his influential work.
- He introduced the concept of the "invisible hand," illustrating how individual self-interest in a free market can lead to societal benefits.
Invisible Hand and Market Dynamics
- The invisible hand metaphor explains natural market regulation through individual actions.
- In a competitive market, companies innovate to improve products, such as smartphones and software, driven by consumer demand.
Demand
- Demand refers to consumers' willingness to purchase goods or services at a specific price during a defined period.
- The demand curve typically slopes downward, indicating an inverse relationship between price and quantity demanded; as prices decrease, consumers buy more.
- A rightward shift in demand indicates greater willingness to purchase at various price levels, while a leftward shift signifies reduced willingness.
Supply
- Quantity supplied refers to the specific amount of a product that producers are willing to sell at a certain price point.
- Supply is the overall relationship between product price and quantity producers are willing to sell.
- The supply curve slopes upward, showing a direct relationship between price and quantity supplied; as prices rise, producers supply more.
Market Equilibrium
- Market equilibrium occurs at the point where quantity demanded equals quantity supplied at a specific price.
- A surplus happens when quantity supplied exceeds quantity demanded at a given price, leading to downward pressure on prices.
- A shortage occurs when quantity demanded exceeds quantity supplied, creating upward pressure on prices.
Law of Supply
- The law of supply states that price and quantity supplied have a direct relationship; as price increases, quantity supplied also increases.
- When supply increases, the supply curve shifts right, lowering prices and increasing output; when supply decreases, the supply curve shifts left, raising prices but lowering output.
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