MicroeconomicsLesson 1 of 3 in the course Demand and Supply

Demand, Supply, and Market Equilibrium: Core Relationships and Price Pressures

5 flashcards · 5 quiz questions · 5 match pairs · 5 fill-in sentences · English

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Summary

In economics, demand is the amount of a good or service consumers are willing and able to purchase at each possible price. Both willingness and ability matter. A person may want a car, but without the ability to pay, that want does not count as effective demand. Likewise, someone who cannot legally drive has no effective demand for a car as a means of personal transportation.

All flashcards

What is supply?
The relationship between prices and the amounts producers are willing to produce and bring to market.
What is the law of supply?
The usual positive relationship between price and quantity supplied, assuming other influences remain constant.
What is market equilibrium?
The point where quantity demanded equals quantity supplied.
What is a market surplus?
A situation in which quantity supplied exceeds quantity demanded at the current price.
What is a market shortage?
A situation in which quantity demanded exceeds quantity supplied at the current price.

Quiz questions

  1. In economics, what does supply describe?Answer: The amounts producers are willing to bring to market at different prices.
  2. According to the law of supply, what usually happens to quantity supplied when price rises, other influences held constant?Answer: Quantity supplied rises.
  3. At a market's equilibrium price, what is true of quantity demanded and quantity supplied?Answer: They are equal.
  4. When a market price is above equilibrium, what condition typically results?Answer: A surplus, because quantity supplied exceeds quantity demanded.
  5. When a market price is below equilibrium, what condition typically results?Answer: A shortage, because quantity demanded exceeds quantity supplied.

Based on Principles of Economics 3e by Steven A. Greenlaw, David Shapiro, Daniel MacDonald (OpenStax), licensed CC BY 4.0. Adapted into a summary, flashcards and quizzes.

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