Ch04 - CHAPTER CHECKLIST When you have completed your study...

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When you have completed your study of this chapter, you will be able to C H A P T E R C H E C K L I S T Distinguish between “quantity demanded” and “demand” and explain what determines demand. 1 Distinguish between “quantity supplied” and “supply” and explain what determines supply. Explain how demand and supply determine price and quantity in a market and explain the effects of changes in demand and supply. 2 3 Explain how price ceilings, price floors, and sticky prices cause shortages, surpluses, and unemployment. 4
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COMPETITIVE MARKETS A market is any arrangement that bring buyers and sellers together. In this chapter, we study a competitive market that has so many buyers and so many sellers, each ‘small,’ that no individual buyer or seller can influence the price.
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4.1 DEMAND Quantity demanded The amount of a good, service, or resource that people are willing and able to buy during a specified period at a specified price. The quantity demanded is an amount per unit of time. For example, the amount per day or per month. “Quantity demanded” is irritating jargon; it just means ‘how much people want to buy, given the price and all other conditions.’
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4.1 DEMAND The Law of Demand Other things remaining the same, If the price of a good rises, the quantity demanded of that good decreases. If the price of a good falls, the quantity demanded of that good increases. i.e., how much people want to buy, and the ‘own- price’ of the good or service, are inversely related.
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4.1 DEMAND Demand Schedule and Demand Curve Demand ‘Demand’ [that word alone] means the entire relationship between the quantity demanded and the price of a good when all other influences on buying plans remain the same. Demand is a list of the quantities people would want to buy at all the possible different prices and is illustrated by the demand curve.
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4.1 DEMAND Demand schedule A list of the quantities demanded at each different price when all the other influences on buying plans remain the same. Demand curve A graph of the relationship between the quantity demanded of a good and its own price when all other influences on buying plans remain the same.
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4.1 DEMAND
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4.1 DEMAND Individual Demand and Market Demand Market demand The sum of the demands of all the buyers in a market. The market demand curve is the horizontal sum of the individual demand curves of all the individual buyers in the market.
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4.1 DEMAND Changes in Demand Change in the quantity demanded A change in the quantity of a good that people plan to buy that results from a change in the own-price of the good. Change in demand A change in the quantity that people plan to buy when any influence other than the own- price of the good changes.
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4.1 DEMAND This figure shows changes in demand.
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