{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

ECON 2010-Exam 1

ECON 2010-Exam 1 - Chapter 3 Where Prices Come From...

Info icon This preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
8-26-09 Chapter 3-- Where Prices Come From: - Interaction of demand and supply o Perfectly competitive market- market where following conditions are in effect: Many buyers and sellers, none w/any power All firms selling identical products No barriers significant barriers to entry for new firms wishing to enter market - Demand side of market: o Demand schedules and demand curves Demand schedule: table or chart showing relationship between price of product and quantity of product demanded Quantity demanded : amt of good/ service that consumer is willing and able to purchase at given price Demand curve: curve showing relationship between price of product and quantity of product demanded Market demand: demand by all consumers of given good/service **Figure 3- 1** o Law of Demand All else constant, when price of good falls, quantity demanded of good will increase--- price of a good rises, quantity demanded of good will decrease Substitution effect: change in quantity demanded of good that results from change in price, making good more or less expensive relative to other goods that are substitutes Income effect: change in quantity demanded of good that results from effect of change in good’s price on consumers’ purchasing power o The ceteris paribus condition: Ceteris paribus( “all else equal”) —requirement that when analyzing relationship between 2 variables—such as price and quantity demanded—other variables must be held constant Shift of demand curve is an increase or decrease in demand ; movement along a demand curve is an increase or decrease in quantity demanded o Variables that Shift Market Demand Many variables other than price can influence market demand Income :
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Normal good: good for which demand increases as income rises and decreases as income falls Inferior good: good for which demand increases as income falls and decreases as income rises Price of related goods: Substitutes: good and services that can be used for same purpose Complements: goods and services that are used together Tastes & Preferences: Consumers can be influenced by an advertising campaign for product *why people do/purchase things that don’t necessarily make sense* Size of Market (including population and demographic shifts) Demographics : characteristics of population w/ respect to age, race, and gender; Houston vs. Baton Rouge Expected Future Prices : consumers choose not only which products to buy but also when to buy them **TABLE 3-1** Change in Demand versus Change in Quantity Demanded **FIGURE 3-3** - Supply Side of Market o Quantity supplied: amt of good or service that firm is willing and able to supply at given price o Supply Schedules and Supply Curves Supply schedule: table that shows relationship between price of product and quantity of product supplied Supply curve: curve that shows relationship between price of product and quantity of product supplied **FIGURE 3- 4** o Law of Supply:
Image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern