Chapter Outline - Ch.3 - Demand - 9-5-07

Chapter Outline - Ch.3 - Demand - 9-5-07 - Chapter 3...

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Chapter 3 Outline – Demand – 9-5-07 A model – a simplified description of how a market works o The model economists use to explain how prices are determined in a market is called the supply and demand model . Supply and demand model (3 elements): Demand – describes the behavior of consumers in the market Supply – describes the behavior of firms in the market Market equilibrium – connects supply and demand and describes how consumers and firms interact in the market Demand – A relationship between price and quantity demanded. o Relationship between two economic variables The price of a particular good ( price) The quantity of the good consumers are willing to buy at that price during a specific time period. (quantity demanded) Price – the amount of money or other goods that one must pay to obtain a particular good Quantity Demanded – the quantity of a good that people want to buy at a given price during a specific time period. Ceteris paribus – A phrase appended to the definition of demand because the quantity consumers are willing to buy depends on many other things besides the price of the good; we want to hold these other things constant, or equal, while we examine the relationship between price and quantity demanded. Demand schedule – A tabular presentation of demand showing the price and quantity demanded for a particular good, all else being equal. The Law of Demand
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Chapter Outline - Ch.3 - Demand - 9-5-07 - Chapter 3...

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