Demand

The willingness and ability of buyers to purchase different quantities of a good (including service) at different prices during a specific time period.

As the price of a good rises, the quantity demanded of the good falls, and as the price of a good falls, the quantity demanded of the good rises, ceteris paribus.

The numerical tabulation of the quantity demanded of a good at different prices.  A demand schedule is the numerical representation of the law of demand.

The graphical reprensentation of the law of demand.  Usually downward-sloping.

People substitute lower-priced good for higher-priced goods.

For a given period, the marginal (additional) utility (satisfaction) fained by consuming equal successive units of a good will decline as the amount consumed increases.

The number of units of a good that people are willing and able to buy at a particular price.

A movement from one point to another point on the same demand curve caused by a change in the price of the good.

Demand is represented by the entire demand curve.  Change in demand is a change or shift in the entire demand curve.

An increase in demand is represented by a rightward shift in the demand curve and means that individuals are willing and able to buy more of a good at each and every price.

Decrease in Demand

A decrease in demand is represented by a leftward shift in the demand curve and means that individuals are willing and able to buy less of a good at each and every price.

1. Income
2. Preferences
3. Prices of related goods
4. Number of buyers
5. Expectation of future price

Note:  Any factor other than price.

A good the demand for which rises (falls) as income rises (falls).

A good the demand for which falls (rises) as income rises (falls).

A good the demand for which does not change as income rises or falls.

Two goods that satisfy similar needs or desires.  If two goods are substitutes, the demand for one rises (falls) as the price of the other rises (falls).

Examples: Butter and Margarine, Coke and Pepsi.

Two goods that are used (consumed) jointly.  If two goods are comlements, the demand for one rises (falls) as the price of the other falls (rises).

The willingness and ability of sellers to produce and offer to sell different quantities of a good at different prices during a specific period.

As the price of a good rises, the quantity supplied of the good rises, and as the price of a good falls, the quantity supplied of a good falls, ceteris paribus.

The graphical representation of the law of supply.  Usually Upward-sloping.

The numerical tabulaton of the quantity supplied of a good at different prices. A supply schedule is the numerical representation of the law of supply.

• Prices of relevant resources
• Technology
• Number of sellers
• Expectations of future price
• Taxes and Subsidies
• Government restrictions

Note: Like in the case of demand curve all factors other than price.

• Equilibrium means "at rest".
• Equilibrium in a market is the price-quantity combination for which there is no tendency for buyers or sellers to move away.
• Graphically, equilibrium is the intersection point of the supply and demand curves.
• Manually beneficial trade between buyers and sellers drives the market to equilibrium.
  

The price at which the quantity demanded of a good equals supplied.

The quantity that corresponds to equilibrium price. The quantity at which the amount of the good that buyers are willing and able to buy equals the amount that sellers are willing and able to sell, and both equal the amount bought and sold.

Demand and supply together establish equilibrium price and equilibrium quantity.

A state of either surplus or shortage in a market.

A price other than the equilibrium price.  A price at which quantity demanded does not equal quantity supplied.

A condition in which quantity supplied is greater than quantity demanded.  Surplus occurs at prics above equilibrium price.

A condition in which quantity demanded is greater tha quantity supplied.  Shortages occur only at prices below equilibrium price.

The difference between the maximum price a buyer is willing and able to pay for a good or service and the price actually paid. 

CS=Maximum buying price - Price Paid

The more consumers' surplus that buyers receive, the better off they are.

The difference between the price sellers receive for a good and the minimum price for which they would have sold the good.

PS=Price received - Minimum selling price

The more producers' surplus that sellers receive, the better off they are.

Demand rises (the demand curve shifts rightward), and the supply is constant (the supply curve does not move). Equilibrium prices rises, and E quantity rises.
Demand falls, supply is constant.  E price falls, E quantity falls.
Supply rises, demand is constant.  E price falls, E quantity rises.
Supply falls, demand is constant.  E price rises, E quantity falls.
Demand rises and supply falls by and equal amount.  E price rises, E quantity is constant.
Demand falls and supply rises by an equal amount.  E price falls, E quanty is constant.
Demand rises by a greater amount than supply falls.  E prices rises, E quanity rises.
Demand rises by a lesser amount than supply falls. E P rises, E Q falls.

A government mandated maximum price above which legal trade cannot be made.  If a price ceiling is below the Equilibrium price, some or all of the following effects arise: shortages, fewer exchanges, non-price rationing devices, buying and selling at prohibited prices, and tie-in sales. P C policies intended to help the poor may cause shortages and  the use of non-price rationing devices

A government mandated minimum price.  If a price floor is above the equilibrium price, the following effects arise: surplus and fewer exchanges.

A measure of the responsiveness of quantity demanded to changes in price.

Ed = % change in quantity demanded

        % change in price

Elasticity is not slope.

The perecntage change in quantity demanded is greater than the percentage change in price.

Ed > 1

The percentage change in quantity demanded is less than the percentage change in price.

Ed < 1

The percentage change in quantity demanded is equal to the percentage change in price.

Ed = 1

If quantity demanded is extremely responsive to changes in price, demand is perfectly elastic.  For example, buyers are willing to buy all units of a seller's goods at $5 per unit, but nothing at $5.10.  A small percentage change in price causes an extremely large percentage change in quantity demanded (from buying all to buying nothing).

Ed=

Quantity demanded does not change as price changes.

                   Ed =0

In real world no demand curves are perfectly elastic (horizontal) or perfectly inelastic (vertical) at all prices.  However, few real-world demand curves do approximat the perfectly elastic and inelastic demand curves.