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Chapter 4 Supply and Demand

Chapter 4 Supply and Demand - Chapter 4 Supply and Demand...

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Chapter 4: Supply and Demand Demand Law of demand – quantity demanded rises as price falls, other things constant – vice versa. Demand curve is a graphic representation between price and quantity demanded. The term other things constant serves as a limitation to this law. Demand refers to a schedule of quantities of a good that will be bought per unit of time at various prices. Refers to the entire demand curve as to how much will be bought at various prices. Quantity demanded refers to a specific amount that will be demanded per unit of time at a specific price. Tells us how much will be bought at a specific price – a point on the demand curve. Change in price refers to a movement along a demand curve – price changing quantity demanded. A shift factor of demand causes a shift in demand, graphical representation of the effect of anything other than price on demand. 1. Society’s income a. As individual’s income rises, afford more of the goods they want. b. Normal goods vs. inferior goods 2. The prices of other goods a. Substitutes – inverse relationship in demand with item X (assumes price inc/dec) b. Complements – direct relationship in demand with item X (assumes price inc/dec) 3.
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