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SF / Ecosystem Science and Policy / ECO 2013 / What is the circular flow in supply and demand?

What is the circular flow in supply and demand?

What is the circular flow in supply and demand?

Description

School: Santa Fe College
Department: Ecosystem Science and Policy
Course: Macroeconomics
Professor: Hadley hartman
Term: Spring 2019
Tags: Eco2013 and Macroeconomics
Cost: 50
Name: Exam 1 Study Guide ECO2013
Description: Macroeconomics notes including supply/Demand, The Role of Government, National Income Accounting, and Unemployment.
Uploaded: 01/31/2019
48 Pages 60 Views 1 Unlocks
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Exam I Study Guide ECO 2013 Macroeconomics We also discuss several other topics like What were the two meanings of empires?

Chapter 3 Supply and Demand

Circular flow

  • Business firms supply goods and services to produce markets.
  • Consumers supply factors of production such as their own labor and purchase final goods and services.
  • Federal, state, and local governments provide services to both consumers and businesses.
  • International participants supply imports, purchase exports, and buy sell factors of production...

The Two Markets

  • Factor Market: Any place where factors of production (e.g. land, labor, capital) are bought and sold.
  • Product Market: Any place where finished goods and services are bought and sold on

Opportunity cost

  • The most desired goods or services that are forgone in order to obtain something else.

Supply and Demand

  • Supply
  • The ability and willingness to sell (produce) specific quantities of a good at alternative prices in a given time period, Ceteris paribus.
  • Demond
  • The willingness and ability to buy specific quantities of a good at alternative prices in a given time period,ceteris paribus.

Determinants of Demand  

  • Tastes (desire for this and other goods)
  • Income (of the consumer)
  • Other goods (substitutes / complements)
  • Expectations for income, prices, tastes)

If you want to learn more check out When does a market equilibrium occur?

Determinants of Supply

  • Technology
  • Factor Costs
  • Substitutes Complements
  • Taxes and subsidies
  • Expectations
  • Sellers

Law of Demand

  • As the price of a good decreases, the quantity demanded of the good increases.

Law of supply

  • The quantity of a good supplied in a given time period increases as its price increases.

Substitute goods

  • Goods that substitute for each other; when the price of X rises, the demand for goods increases.

Complementary goods

  • Goods frequently consumed in combination; when the price of good x rises, the demand for good y falls, Ceteris paribus

Movement vs. Shift We also discuss several other topics like What are some concepts of classical conditioning?

Shift

  • A change in the quantity demanded at any price.
  • Movements along a demand curve are a response to price changes for that good. (No changes in determinants of demand)
  • Shifts of the demand curve occur when the determinants of demand change.

Market Demand

  • The total quantities of a good or service people are willing and able to buy at altemative prices in a given time period.

Don't forget about the age old question of How do you calculate national income?
If you want to learn more check out What is the study of animals?
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Market supply

  • The total quantities of a good that sellers are willing and able to sell at alternative prices in a given time period.

Shifts of supply

  • Changes in quantity supplied: movements along a given curve in response to price Changes of that good
  • Changes in supply Shifts of the supply force due to changes in determinants of supply.

Equilibrium

  • The intersection of the supply and demand curve. Where quantity supplied equals quantity demanded
  • Market Mechanism: The use of market prices and sales to signal desired outputs.

Disequilibrium

  • Market Surplus: The amount by which the quantity supplied exceeds the quantity demanded at a given price.
  • Market Shortage: The amount by which the quantity demanded exceeds the quantity supplied at a given price.
  • Price floor: Lower limit set for the price of a good
  • Price ceiling: Upper limit imposed on the price of a good
  • Price Ceilings here 3 possible effects
  • ↑ Quantity demanded
  • ↓Quantity Supplied
  • Create a market Shortage,

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