Supply and Market Dynamics

Front

The Law of Supply

Back

States that as the price of a good or service increases, the quantity of goods and services that suppliers offer will increase.

Front

Effect of Falling Prices on Supply

Back

If prices fall, suppliers are disincentivized from producing as much.

Front

Main influences on supply

Back

Price and Consumer Demand

Front

Other factors influencing supply

Back

Number of suppliers available, level of competition, state of technology, and presence of government support or restriction

Front

The Law of Demand

Back

States that at a higher price, consumers will demand a lower quantity of a good, and vice versa.

Front

Factors that influence demand

Back

- Change in consumer incomes (think recession) - Change in population (think college book stores) - Consumer preferences (think new electronics) - Prices of related goods - Substitutes (Coke vs. Pepsi) - Complements (PB&J)

Front

Equilibrium

Back

A state in which the forces of supply and demand are balanced, resulting in no further change in economic variables.

Front

Surplus

Back

When the supply of a good or service is greater than the demand for it (think those nasty cereals at the store that no one ever buys).

Front

Shortage

Back

Quantity of a product or service demanded is greater than the quantity supplied at the market price (think about brand new gaming system that is always sold out).

Front

Supply and Demand Graph

Back

The graph shows the relationship between supply and demand. The intersection point represents equilibrium, where supply equals demand. Above this point is a surplus, and below is a shortage.