Ch 3 - Chapter 3 Demand, Supply and Price Quantity demanded...

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Chapter 3 – Demand, Supply and Price Quantity demanded Quantity demanded …is the amount of goods that buyers are willing and able to buy in a given time period ( flow ). …rises if, ceteris paribus (other things constant) 1. the price of the good falls ( law of demand ) 2. the price of a substitute good rises e.g. pepsi and coke, butter and margarine 3. the price of a complement good falls e.g. hardware and software, cars and gas 4. average household income rises provided the good is normal e.g. entertainment, owned housing falls provided the good is inferior e.g. public transit, rented housing 5. income is redistributed to groups most likely to buy a good (provided good is normal) e.g. subsidized tuition 6. tastes change in favour of the product e.g. healthy foods 7. population increases 8. the price is expected to rise tomorrow …fall if, the above changes are reversed EC120 Chapter 3 – Supply, demand & price 1 of 10
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Quantity supplied Quantity supplied …is the amount of goods that sellers are willing and able to sell in a given time period ( flow ). …rises if, ceteris paribus (other things constant) 1. the price of the good rises 2. the price of an input falls 3. production technology improves 4. the number of sellers increases …falls if, the above changes are reversed EC120 Chapter 3 – Supply, demand & price 2 of 10
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Ch 3 - Chapter 3 Demand, Supply and Price Quantity demanded...

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