Chapter 4

Chapter 4 - Chapter 4 A. Buyers side of market: Demand 1....

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Chapter 4 A. Buyer’s side of market: Demand 1. Market- where goods and services are exchanged 2. Demand - the ability and willingness to purchase a good or a service at various prices; price doesn’t matter to demand 3. Quantity Demand - a specific amount of a good or a service that is willing and able to be purchased at a specific price; a) Price of the good (-), inverse relationship; specific price, specific amount i) Reservation Price- maximum price for which you would be willing and able to purchase the item 4. Determinants of Quantity Demand a) Income- most important determinant of ability i) Normal good (+) - when a person’s income increases, everything else held constant, your income goes up and you demand more of an anything ii) Inferior good (-) – when you are willing and able to buy less of, your income goes up but you demand less of something b) Price of related goods- people’s tastes in preferences, affect willingness to purchase i) Complements: increase price (+) - the goods could be consumed together; price of one goes up, the demand for the other goes down ii) Substitutes: Increase price (+)
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This note was uploaded on 05/09/2011 for the course ECON 2000 taught by Professor Roussell during the Spring '06 term at LSU.

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Chapter 4 - Chapter 4 A. Buyers side of market: Demand 1....

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