CHAPTER 3 - CHAPTER 3 DEMAND & SUPPLY Price...

Info iconThis preview shows pages 1–10. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: CHAPTER 3 DEMAND & SUPPLY Price Determination in a Competitive Market DEMAND Demand Demand: includes both the willingness and ability to purchase a product Demand: a schedule linking the price of a good to a quantity demanded at this price Demand Demand curve = graphical representation of this relationship Demand Law of demand = the inverse relationship between price & quantity demanded 2 explanations: Income effect : A lower price means I can buy more units of a product out of a given amount of income Substitution effect : A lower price means that a product becomes more attractive relative to other goods serving a similar purpose Demand Other Determinants of Demand: Income Influences the ability to purchase May also influence the willingness to purchase Normal goods vs. Inferior goods Tastes & Preferences Expectations (e.g. about the price in the future) Price of related goods Substitutes vs. Complements Number of consumers in the market Demand Changes in the quantity demanded versus Changes in demand Price changes change in quantity demanded (movement along demand curve) Changes in other determinants change in demand (shift of the whole curve) Demand Changes in the quantity demanded versus Changes in demand SUPPLY Supply...
View Full Document

Page1 / 27

CHAPTER 3 - CHAPTER 3 DEMAND & SUPPLY Price...

This preview shows document pages 1 - 10. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online