Chapter_4_short_version

Chapter_4_short_version - Chapter 4 DEMAND AND SUPPLY 4-2...

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DEMAND DEMAND AND AND SUPPLY SUPPLY Chapter 4 Chapter 4
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4-2 The Law of Demand The Law of Demand Law of demand – there is an inverse relationship between price and quantity demanded. Other things equal: Quantity demanded rises as price falls Quantity demanded falls as price rises Law of demand is based on the fact that people substitute for goods whose price increases.
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4-3 The Demand Curve The Demand Curve The demand curve is the graphic representation of the law of demand. The demand curve slopes downward and to the right. As price goes up, the quantity demanded goes down. D Price (per unit) 0 Quantity demanded (per unit of time) P A Q A A B Q B P B
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4-4 Other Things Constant Other Things Constant Other things constant places a limitation on the application of the law of demand. All other factors, such as changing tastes, prices of other goods, income, and even the weather, are assumed to remain constant, whether they actually remain constant or not.
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4-5 Quantity Demanded Quantity Demanded Versus Demand Versus Demand Quantity demanded refers to a specific amount that will be demanded per unit of time at a specific price. Quantity demanded refers to a specific point on the demand curve. A change in quantity demanded , caused only by a change in the price of the good itself, is shown by a movement along a demand curve .
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4-6 Quantity Demanded Quantity Demanded Versus Demand Versus Demand Demand refers to a schedule of quantities of a good that will be bought per unit of time at various prices, other things constant. It refers to the entire demand curve. A change in demand , caused by anything other than the good’s own price, is shown by a shift in the demand curve .
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4-7 B 100 $2 Quantity Demanded Quantity Demanded Versus Demand Versus Demand D 1 Change in quantity demanded 0 Price (per 50 miles) Quantity demanded (per unit of time) $1 200 A Quantity demanded (per unit of time) D 0 D 1 $2 $1 100 B A Change in demand 200
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Shift Factors of Demand Shift Factors of Demand Shift factors of demand are factors that cause changes in demand (shifts in the demand curve). Society’s Income An increase in income will increase demand for normal goods. An increase in income will decrease
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Chapter_4_short_version - Chapter 4 DEMAND AND SUPPLY 4-2...

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