Understanding Supply and Demand Principles

Front

What is the law of demand?

Back

The law of demand states that, all else being equal, as the price of a good decreases, the quantity demanded increases, and vice versa.

Front

What happens to equilibrium price when demand increases?

Back

When demand increases, the equilibrium price typically rises due to higher competition for the available supply.

Front

What is equilibrium quantity?

Back

Equilibrium quantity is the amount of a good or service that is supplied and demanded at the equilibrium price.

Front

What is the effect of a decrease in supply on equilibrium price?

Back

A decrease in supply, with demand held constant, leads to an increase in equilibrium price.

Front

What is the relationship between production costs and supply?

Back

Generally, if production costs decrease, the supply of the product increases, as producers can afford to produce more.

Front

What is the effect of government taxes on supply?

Back

Government taxes on production typically decrease supply, as they increase the cost of production for suppliers.

Front

What is a shift in demand?

Back

A shift in demand refers to a change in the quantity demanded at every price level, caused by factors other than price, such as consumer preferences or income.

Front

What is a shift in supply?

Back

A shift in supply refers to a change in the quantity supplied at every price level, caused by factors such as production costs or technology.

Front

What is the effect of consumer preferences on demand?

Back

Changes in consumer preferences can lead to an increase or decrease in demand for certain goods, shifting the demand curve.

Front

What is the concept of price elasticity of demand?

Back

Price elasticity of demand measures how much the quantity demanded of a good responds to a change in its price.