Chapter 4 Macro

Chapter 4 Macro - 4.1 Markets Every market is different...

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4.1 Markets Every market is different. Some markets are local (such as housing or the market for cement), but numerous others are global (such as automobiles or gold). The important point about a market is not what it looks like, but what it does–it facilitates trade. Buyers, as a group, determine the demand side of the market, whether it is consumers purchasing goods or firms purchasing inputs. Sellers, as a group, determine the supply side of the market, whether it is firms selling their goods or resource owners selling their inputs. 4.2 Demand According to the law of demand , the quantity of a good or service demanded varies inversely with its price, ceteris paribus. More directly, other things equal, when the price of a good or service falls, the quantity demanded increases. An individual demand schedule reveals the different amounts of a particular good a person would be willing and able to buy at various possible prices in a particular time interval, other things equal. An individual demand curve is a graphical representation that shows the inverse relationship between price and quantity demanded. It reveals the relationship between the price and the quantity demanded, showing that when the price is higher, the quantity demanded is lower. Economists usually speak of the demand curve in terms of large groups of people. The horizontal summing of the demand curves of many individuals is called the market demand curve for a product. The market demand curve shows the amounts that all the buyers in the market would be willing and able to buy at various prices. 4.3 Shifts in the Demand Curve A change in a good's price leads to a change in quantity demanded , illustrated by moving along a given demand curve. But price is not the only thing that affects the quantity of a good people buy. The other factors that influence the demand curve are called determinants of demand, and they shift the entire demand curve—a change in demand .
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prices of related goods incomes of demanders number of demanders tastes of demanders expectations of demanders An increase in demand is represented by a rightward shift in the demand curve. A decrease in demand is represented by a leftward shift in the demand curve.
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Chapter 4 Macro - 4.1 Markets Every market is different...

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