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🔹 Supply The quantity of a good or service that producers are willing and able to sell at various prices during a given period. 🔹 Demand The quantity of a good or service that consumers are willing and able to buy at various prices. 🔹 Law of Supply As the price of a product increases, the quantity supplied generally increases (and vice versa). 🔹 Law of Demand As the price of a product increases, the quantity demanded generally decreases (and vice versa). 🔹 Equilibrium Price The price at which the quantity of a good supplied equals the quantity demanded. Also known as the market-clearing price. 🔹 Shortage Occurs when demand exceeds supply at a given price – leads to upward pressure on prices. 🔹 Surplus Occurs when supply exceeds demand at a given price – leads to downward pressure on prices. 🔹 Elasticity A measure of how much quantity demanded or supplied changes in response to a change in price. Elastic demand: large response to price change (e.g. luxury goods) Inelastic demand: small response to price change (e.g. basic necessities) 🔹 Shifts vs. Movement Movement along the curve: caused by a price change. Shift of the curve: caused by non-price factors (e.g. income, technology, tastes, taxes). 🔹 Factors affecting demand Consumer income Preferences and tastes Prices of related goods (substitutes and complements) Expectations of future prices Population size 🔹 Factors affecting supply Production costs Technology Number of sellers Expectations of future prices Government policies (taxes, subsidies)