Economics chapter 3- supply and demand

Economics chapter 3- supply and demand - Economics- Chapter...

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Economics- Chapter 3 Notes: Supply and Demand The Demand Side of the Market We consider not what a consumer wants to buy, but what the consumer is both willing and able to buy The Demand of an Individual Buyer Quantity Demanded- the amount of a good or service that a consumer is willing and able to purchase at a given price Demand Schedules and Demand Curves Demand schedule- a table showing the relationship btw the price of a product and the quantity of the product demanded Demand curve- a curve that shows the relationship btw the price of a product and the quantity of the product demanded Buyers demand a large quantity of a product as the price falls b/c the product becomes cheaper relative to other products and b/c they can afford to buy more at a lower price Individual Demand and Market Demand Market demand- the demand by all the consumers of a given good and service The Law of Demand The inverse relationship btw. the price of a product and the quantity of the product demanded is known as the Law of Demand Law of Demand- Law of Demand -holding everything else constant, when the price of a product falls, the quantity demanded of the product will increase, and when the price of a product rises, the quantity demanded of the product will decrease What Explains the Law of Demand? Substitution effect- the change in the quantity demanded of a good that results from a change in price making the good more or less expensive relative to other goods that are substitutes Income effect- the change in the quantity demanded of a good that results from the effect of a change in the good’s price on consumer purchasing power o Purchasing power refers to the quantity of goods that can be bought w/ a fixed amt of income
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When the price of a good falls, the increased purchasing power of consumers’ income will usually lead them to purchase a larger quantity of the good When the price of a good rises, the decreased purchasing power of consumers’ income will usually lead them to purchase a smaller quantity of the good Holding Everything Else Constant: The Ceteris Paribus Condition
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Economics chapter 3- supply and demand - Economics- Chapter...

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