| A | B |
|---|
| Supply | The amount of goods producers are willing and able to produce and sell at a given price during a certain period of time. |
| Demand | A consumer’s willingness and ability to buy products at a given price during a certain period of time |
| law of supply | 1. With all other factors being equal, as the price of a product increases, the quantity supplied will increase, and as the price of a product decreases, the quantity supplied will decrease. |
| law of demand | With all other factors being equal, as the price of a product increases, consumer demand for the product decreases, and as the price of a product decreases, consumer demand for the product increases |
| Surplus | When supply exceeds demand |
| Shortage | When demand exceeds supply, also referred to as scarcity |
| Equilibrium | Occurs when supply and demand are equal. |
| Elasticity | The degree to which demand for a product is affected by its price |
| Elastic demand | Refers to how changes in the price of a product result in a change on the demand for that product |
| Inelastic demand | Refers to how changes in the price of a product have very little affect on the demand for that product |
| Availability of substitutes | If a substitute is easily obtainable, demand becomes more elastic |
| Brand loyalty | Many customers will only purchase a certain brand, customers will accept no substitutes |
| Price relative to income | When an increase in the price of a good or service does not have a major impact on a customer’s budget, the demand is usually inelastic |
| Urgency of purchase | If a purchase must be made immediately, demand tends to be inelastic |
