• The amount of any good or service or resources that people are willing and able to buy during a specified period at a specified price
• Is measured as an amount  per unit of time
• Is one quantity at one price

• The relationship between the quantity demanded & the price of a good when all other influences on buying plans remains the same
• Is a list of quantities at different prices illustrated by a demand schedule & a demand curve

1. Substitutes
2. Complements

True or False

A change in price of one good can bring a change in the demand for a related good

Explain

Change in Quantity Demanded

vs

Change in Demand

Change in Quantity Demanded means a movement up or down along the demand curve

vs

Change in Demand means a shift leftward or rightward of the demand curve

An increase in the quantity demanded means a movement down along the demand curve

A decrease in quantity demanded means a movement up along the demand curve

An increase in demand means the demand curve shifts rightward

[image]

A decrease in demand means the demand curve shifts leftward.

[image]

What are the causes of increase in demand?

1. The price of the substitute rises
2. The price of a complement falls
3. The price of a good is expected to rise or income is expected to rise in the future
4. Income increases & good is a normal good
5. The number of buyers increases

What are the causes of decrease in demand?

1. The price of a substitute falls
2. The price of a complement rises
3. The price of the good is expected to fall or income is expected to fall in the future
4. Income decreases & good is a normal good
5. The number of buyers decreases

Quantity Supplied

• The amount of any good, service, or rseource that people are willing and able to sell during a specified period at a specified price
• Is measured as an amount per unit of time
• Is one quantity at one price

• The relationship between the quantity supplied and the price of a good when all other influences on selling plans remains the same
• Is a list of quantities at different prices illustrated by a supply schedule & supply curve

Is a list of the quantities supplied at each different price when all other influences on sellin plans remain the same

• Is output per unit of input
• An increase in productivity lowers costs and increases supply
• Technological change is the main influence on productivity

When:

Quantity demanded

=

Quantity Supplied

!When buyers and sellers plans are consistent

Price @ Quantity Demanded

=

Price @ Quantity Supplied

True or False

An equilibrium might be stable or unstable

States that:

1. When there is a shortage, price rises
2. When there is a surplus, price falls

1._____is the regulator that pulls the market towards equilibrium

1. A situation in which the quantity supplied exceeds the quantity demanded
2. Price is above the equilibrium price
3. Price decreases

1. Quantity Demanded exceeds Quantity Supplied
2. Price is below the Equilibrium Price
3. Price rises

What are the 3 price rigidities?

1. Price Ceiling
2. Price Floor
3. Sticky Price

1. Prices of related goods
2. Income
3. EXpectations
4. Number of buyers
5. Preferences

A change in price of one good can bring a change in the demand for a related good

1. If the price of one of the good's substitutes rises then the demand for that good increases
2. If the price of one of its substitutes falls, the demand for that good decreases
3. That is the price of one of its substitutes move in the same direction

A change in the price of one good can bring a change in the demand of a related good

1. The demand for a good decreases if the price of one of its complements rises
2. The demand for a good increases if the price of one of its complements falls
3. That is the demand for a good & the price of one of its complements move in opposite directions

What are the main influences that change supply?

1. Prices of related goods
2. Prices of resources & other inputs
3. Expectations
4. Number of Sellers
5. Productivity

An increase or decrease in the quantity supplied means a movement up or down along the supply curve

[image]

A decrease in Supply shifts the supply curve leftward

[image]

An increase in supply shifts the supply curve rightward

[image]

1. The price of a substitute in production falls
2. The price of a complement in production rises
3. A resource price or other input orice falls
4. The price of the good is expected to fall
5. The number of sellers increases
6. Productivity increases

Equilibrium might be stable or unstable because the market is constantly pulled towards a stable erquilibrium in w/c neither buyers or sellers can improve their positions by chaing either the price or quantity. Buyers want the lowest possible price and sellers want the highest possible price

Change in Demand

=

Change in Quantity Supplied

=

A movement along the Supply Curve

An increase in demand 

1. Shifts the Demand Curve rightward
2. Raises the Price
3. Incrases Quantity Supplied
4. Increases Equilibrium Quantity

[image]

A decrease in Demand:

1. Shifts the Demand Curve Leftward
2. Lowers the Price
3. Decreases the Quantity Supplied
4. Decreases the Equilibrium Quantity

[image]

Change in Supply

=

Change in Quantity Demanded

=

A movement along the Demand Curve

An increase in Supply:

1. Shifts the Supply Curve rightward
2. Lowers the Price
3. Increase the Quantity Demanded
4. Increases the Equilibrium Quantity

[image]

A decrease in Supply:

1. Shifts the Supply Curve leftward
2. Raises the price
3. Decreases the Quantity Demanded
4. Decreases the Equilibrium Quantity

[image]

The effect depends on whether it is imposed at a level above or below the equilibrium pice:

Above Equilibrium Price

=

No Effect on Market

Below Equilibrium Price

=

Shortage

Distinquish between Quantity Supplied and Supply.

Explain what determines Supply

P.55