Understanding Supply and Demand

Front

Supply

Back

amount of a good or service that producers are willing and able to sell at every given price

Front

Demand

Back

amount of a good or service that consumers are willing and able to buy at every given price

Front

Law of Supply

Back

as price increases, the quantity supplied increases

&

as price decreases, the quantity supplied decreases

Front

Law of Demand

Back

as price increases, the quantity demanded decreases

&

as price decreases, the quantity demanded increases

Front

Market Equilibrium

Back

where quantity supplied equals quantity demanded

Front

Price Elasticity of Demand (formula)

Back

latex="\frac{\%\ \text{change in quantity demanded}}{\%\ \text{change in price}}">

Front

Determinants (Shifters) of Demand

Back

Consumer Tastes & Preferences

Income

Population/Number of Consumers

Price of a Related Good (substitutes, complements)

Future Expectations

Front

Determinants (Shifters) of Supply

Back

Input/Resource Cost

Technology

Number of Sellers

Government Action (taxes, subsidies, regulations)

Future Expectations

Front

Price Floor

Back

a legal minimum price that can be charged for a good or service

Always set above equilibrium & causes surpluses in the market

Example: Minimum Wage

Front

Price Ceiling

Back

a legal maximum price that can be charged for a good or service

Always set below equilibrium & causes shortages in the market

Example: Rent Control