chap3 - Chapter3:DemandandSupply Bartervs.monetaryeconomy...

Info icon This preview shows pages 1–14. Sign up to view the full content.

View Full Document Right Arrow Icon
    Chapter 3: Demand and Supply
Image of page 1

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

View Full Document Right Arrow Icon
    Barter vs. monetary economy Barter – goods are traded directly for  other goods Problems: requires double coincidence of wants large number of trading ratios: N(N-1)/2  (high information costs) Monetary economy has lower  transaction and information costs
Image of page 2
    Relative and nominal prices Relative price = price of a good in terms  of another good Nominal price = price expressed in  terms of the monetary unit Relative price is a more direct measure  of opportunity cost
Image of page 3

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

View Full Document Right Arrow Icon
    Markets In a market economy, the price of a  good is determined by the interaction of  demand and supply
Image of page 4
    Demand A relationship between price and  quantity demanded in a given time  period,  ceteris paribus .
Image of page 5

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

View Full Document Right Arrow Icon
    Demand schedule
Image of page 6
    Demand curve
Image of page 7

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

View Full Document Right Arrow Icon
    Law of demand An inverse relationship exists between  the price of a good and the quantity  demanded in a given time period,  ceteris paribus . Reasons: substitution effect income effect
Image of page 8
    Change in quantity demanded  vs. change in demand Change in quantity demanded Change in demand
Image of page 9

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

View Full Document Right Arrow Icon
    Market demand curve Market demand is the horizontal summation  of individual consumer demand curves
Image of page 10
    Determinants of demand tastes and preferences prices of related goods and services income number of consumers expectations of future prices and  income
Image of page 11

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

View Full Document Right Arrow Icon
    Tastes and preferences Effect of fads:
Image of page 12
    Prices of related goods substitute goods – an increase in the  price of one results in an increase in the  demand for the other.
Image of page 13

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

View Full Document Right Arrow Icon
Image of page 14
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