ECN607 – Managerial Economics Study aid: 2.1 Introduction This module introduces one of the major topics of economics, supply and demand, which forms the basis for a large part of the analysis used throughout this course. The ideas of the difference between money price and relative price, the law of demand, income and substitution effects, the distinction between a change in demand (supply) and change in quantity demanded (quantity supplied), the law of supply, equilibrium, surpluses, and shortages are introduced. The Law of Demand Demand is a schedule that displays the amounts of a good or service that people will buy at any price during a particular period of time, ceteris paribus. . There is an inverse relationship between price and quantity demanded. For example, when the relative price of a product increases, people will buy less of it and when the relative price of a good goes down, people buy more of it, ceteris paribus. Quantity demanded is a function of price: Qd= f (P). A demand curve can be stated algebraically as
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This note was uploaded on 08/16/2010 for the course BUS ECON607 taught by Professor Tbd during the Spring '10 term at Grand Canyon.