Matthew_McCoy_Week_2_Chapter_3_Assignment - Matthew McCoy...

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Matthew McCoy ECON201 Week 2 Chapter 3 Assignment (#2) June 22, 2011 Professor John Volpe 1. Explain the law of demand. Why does a demand curve slope downward? How is a market demand curve derived from individual demand curves? The law of demand is the principle that, other things equal, an increase in a product’s price will reduce the quantity of it demanded, and conversely for a decrease in price. The demand curve slopes downward because it reflects the law of demand – people buy more of a product, service, or resource as its price falls. The relationship between price and quantity The market demand curve is basically summed horizontally the quantities demanded by the buyers on the market to obtain the total quantity demanded at that price; we then plot the price and the total quantity demanded as one point on the market demand curve. 2. What are the determinants of demand? What happens to the demand curve when any of these determinants change? Distinguish between a change in demand and a movement along a fixed demand curve, noting the cause(s) of each. The determinants of demand are factors that are assumed to be constant when a demand curve is drawn. The basic determinants of demand are consumers’ preferences, the number of
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This note was uploaded on 09/24/2011 for the course ECON 202 taught by Professor Unknown during the Spring '08 term at Mountain State.

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Matthew_McCoy_Week_2_Chapter_3_Assignment - Matthew McCoy...

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