supply and demnd

supply and demnd - • Change in price of related goods •...

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Section 1: Supply and Demand Economics develops “models” that attempt to understand and explain complex economic behavior in a simplified, but systematic way Supply and demand are ways of understanding the interaction between buyers (demand) and sellers (supply) Demand Demand Schedule Data plotting of the price and quantity Demand Curve Shows how much of a good or service that people (consumers) will buy at different prices Price represents a marginal willingness to pay Economists believe price plays a key role in explaining how much people will buy of a particular item The importance of price is why economists have reserved a place on the XY graph for price A prince change results in “movment” along a demand curve. A prince change causes a A price change along the demand curve would be a change in quantity demanded Other factors that influence consumer demand Change in income Change in tastes
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Unformatted text preview: • Change in price of related goods • Change in consumer expectations • A shift in the Market Demand Curve: Called an “Increase in Demand” or a “Decrease in Demand” • Ex: Income goes up => demand • “Normal Goods”- as income goes up, football tickets go up • “Inferior Goods”- as income goes up, ramen noodles go down • Ex: Taste and preference goes down => demand Changes in the Price of Related Goods • If the price of a Mac falls, the quantity will go up. Therefore, the whole demand curve for PC’s will shift down. These are substitutes • If the price of peanutbutter goes up, the quantity demanded will go down. Therefore, the whole demand curve for jelly will shift down. These are complementary goods. Changes in Consumer Expectations • If there is an expected snow storm, there is a shift in demand up for bread and milk at grocery stores...
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This note was uploaded on 03/30/2008 for the course AAEC 1006 taught by Professor Mjellerbrock during the Spring '07 term at Virginia Tech.

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