Economics – Unit 2 – Microeconomics

Consumer willingness and ability to buy products

the amount of a good or service that a consumer is willing and able to purchase at a given price

Changes in the price of a product affect the quantity demanded (a movement along the curve). Changes in any other factor, such as income or preferences, shift the entire curve to the left or right

A situation in which an increase or a decrease in price will not significantly affect demand for the product

A situation in which consumer demand is sensitive to changes in price

Factors other than price that affect demand:
1. Consumer Tastes
2. Market Size (# of Consumers)
3. Income
4. Consumer Expectations
5. Price of Related Goods - Substitutes
6. Price of Related Goods - Compliments

a determinant that focuses on what people like and do not like and use advertising

Amount of people in a market

More income = more demand, less income = less demand

consumers ideas about future income and future market prices

consumers' tendency to prefer lower priced, similar items

items that are usually purchased/used together

a good that consumers demand less of when their incomes increase

a good that consumers demand more of when their incomes increase

The quantity of something that producers have available for sale

the amount a supplier is willing and able to supply at a certain price

Supply is the curve, but quantity supplied is a point on the curve.

Exists when a small change in price causes a major change in quantity supplied.

exists when a change in a good's price has little impact on the quantity supplied

Factors other than price that shift the supply curve to the left or right
1. Input Prices
2. Government Tools (Taxes, Regulations & Subsidies)
3. New Technology
4. Competition
5. Producer Expectations
6. Price of Related Goods

wages, prices of raw materials

Taxes/regulations make it harder and more expensive for producers to produce

Financial support from the government; they make it easier and cheaper for producers to produce

refers to how many producers exist in a market

makes it easier for producers to produce. It shifts the supply curve to the right everytime

a producers tendency to produce in a similar (using the same factors of productions) market with higher market prices

Productions can shift based on future expectations made by producers

a situation in which quantity demanded equals quantity supplied - where MOST consumers and producers agree on price and quantity

when the quantity supplied exceeds the quantity demanded....too many goods on the market

when the quantity demanded exceeds the quantity supplied....too few goods on the market