chp3_sum - CHAPTER 3 DEMAND, SUPPLY, AND MARKET EQUILIBRIUM...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
CHAPTER 3 DEMAND, SUPPLY, AND MARKET EQUILIBRIUM DEMAND A demand curve shows the quantities demanded (of a good/ service) at different prices. To derive demand curve, we hold everything that affect demand constant, except for its price. The figure illustrates the demand curve resulting from the demand schedule: Price (dollars) Quantity demande d 1 5 2 4 3 3 4 2 5 1 The law of demand states that other things remaining the same, the higher the price of a good, the smaller is the quantity demanded; and the lower the price of a good, the greater the quantity demanded. A Change in the Quantity Demanded Versus a Change in Demand A change in price results in a movement along the demand curve, which is change in the quantity demanded . A change in the factors other than the price of the good shifts the demand curve, which is a change in demand . An increase in demand shifts the demand curve rightward and a decrease in demand shifts the demand curve leftward. In the figure, the movement along demand curve D 0 from point a to point b as a result of the price rising from $2 to $4 is a change in the quantity demanded. The shift of the demand curve from D 0 to the new demand curve D 1 is a change in demand.
Background image of page 1

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

View Full DocumentRight Arrow Icon
Factors That Change Demand Income : A normal good is one for which demand increases as income increases; an inferior good is one for which demand decreases as income increases. Prices of Related Goods: A substitute is a good that can be used in place of another good (tea and coffee) and a complement is a good that is used in conjunction with another good (sugar and coffee). A rise in the price of a substitute or a fall in the price of a complement increases the demand for the good. Preferences: Preferences are an individual’s attitudes toward goods and services. If people “like” a good more, the demand for it increases. Expected Future Income
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 03/27/2009 for the course EC Ec201 taught by Professor Koksal during the Spring '07 term at N.C. State.

Page1 / 5

chp3_sum - CHAPTER 3 DEMAND, SUPPLY, AND MARKET EQUILIBRIUM...

This preview shows document pages 1 - 3. Sign up to view the full document.

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