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

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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.
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