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~~~a - Chapter Three Supply and Demand A demand curve is...

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Chapter Three- Supply and Demand A demand curve is the graphical representation of the demand schedule; it shows how much of a good or service consumers want to buy at any given price. That is, 8,000 is the quantity demanded at a price of \$250 What causes a demand curve to shift? Changes in the Prices of Related Goods Substitutes: Two goods are substitutes if a fall in the price of one of the goods makes consumers less willing to buy the other good . Ex.: muffins and donuts. Announcement of Gretzky’s retirement generates an increase  Announcement of Gretzky’s retirement generates an increase  in demand, an increase in the quantity demanded at any given  in demand, an increase in the quantity demanded at any given  price. price. The increase in demand shifts the demand curve to the right.   This event is represented by the two demand schedules:   Demand before the announcement  Demand after the announcement  Shifts of the Demand Curve A change in the quantity demanded at any given price, represented  by the replacement of the original demand curve with a new demand  curve.  Gretzky is  Gretzky is  retiring!!! retiring!!!

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Complements: Two goods are complements if a fall in the price of one good makes people more willing to buy the other good . Ex: squash balls and squash racquets . Changes in Income Normal Goods: When a rise in income increases the demand for a good—the normal case—we say that the good is a normal good. Inferior Goods: When a rise in income decreases the demand for a good, it is an inferior good . Ex: instant noodles . Changes in Tastes Changes in Expectations “Movement Along” vs. “Shift” of the Supply Curve A movement along the supply curve is a change in the quantity supplied of a good that is the result of a change in that good’s price. The principal factors that shift the supply curve: changes in the price of an input changes in technology changes in expectations . Thus in any well-established, ongoing market, all sellers receive and all buyers pay approximately the same price. This is what we call the market price. There is a surplus of a good when the quantity supplied exceeds the quantity demanded. Surpluses occur when the price is above its equilibrium level. Just as demand curves  normally slope  downwards, supply  curves normally  slope  upwards : The higher the price  being offered, the more  people will be willing to  part with their hockey  tickets,… … or for that matter,  the more of any good  they will be willing to  sell.  supply curve  shows graphically how much of a good or service  people are willing to sell at any given price.   Gretzky is retiring!!!
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