MicroeconomicsLesson 2 of 5 in the course Demand and Supply

Demand and Supply Shifts: Buyer Influences, Production Costs, and Policy

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

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Summary

This lesson explains what demand measures, which factors besides price influence buyers, and why economists use the ceteris paribus assumption when analyzing demand.

Demand is the amount of a good or service consumers are willing and able to purchase at each possible price. Both parts matter: a person must want the product and have the ability to pay for it. A demand curve displays the relationship between a product's price and the quantity demanded, holding other relevant factors constant.

All flashcards

What is demand?
The amount of a good or service consumers are willing and able to purchase at each possible price.
What are tastes and preferences?
Buyers' likes, dislikes, and desires, which influence how much they are willing to buy.
What does ceteris paribus mean?
“Other things being equal”: relevant factors besides the ones being studied are held constant.
How can income affect demand?
Income affects consumers' ability to afford goods and services, and thus can change how much they are willing and able to buy.
What is market demand?
The combined demand of buyers in a market; it reflects an overall pattern and not necessarily identical changes by every individual.

Quiz questions

  1. If a product's own price changes while other relevant factors stay constant, what happens to its demand curve?Answer: Quantity demanded changes along the existing curve.
  2. What characterizes an inferior good when consumer income increases, other things equal?Answer: Demand for it decreases at each price.
  3. When two goods are complements, what is likely to happen to demand for one if the price of the other rises?Answer: Demand for the paired good tends to decrease.
  4. If firms face higher input costs, how does this generally affect supply at each price?Answer: Supply decreases and the curve shifts left.
  5. How does a subsidy that lowers firms' production costs generally affect supply?Answer: It increases supply and shifts the curve right.

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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