Demand vs Supply

Demand vs Supply

Demand - the quantities that people are willing and ale to buy at carious prices.

Causes- 1. Δin Buyers Taste

               2.Δ in number of buyers

               3.Δ in income (normal goods and inferior goods)

               4.Δ in the price of related goods (complementary goods and substitute goods)

               5.Δ in expectations(buyer)

Supply - the quantities that producers or sellers are willing and able to produce at various prices.

Causes- 1. Δin weather

               2.Δ in number of sellers/suppliers

               3.Δ in technology

               4.Δ in the cost of production

               5.Δ in taxes or subsidies

               6.Δ in expectations (seller)

Business Cycles

Peak- highest point of real GDP, greatest amount of spending and the lowest amount of unemployment. in this stage inflation becomes a problem

Expansion-recovery phase, this is where real GDP is increasing due to an increase in spending and a decrease in unemployment

Contraction(Recession)- where real GDP declines for 6 months due to a reduction ins spending and increasing unemployment

Trough-this is the lowest point of real GDP, least amount of spending and the highest unemployment Demand vs Supply