Chapter4 Additional Insights

Chapter4 Additional - Chapter 4 Supply and Demand Read this chapter carefully Demand and supply are the two sides of a market The demand side

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Chapter 4: Supply and Demand Read this chapter carefully! Demand and supply are the two sides of a market. The demand side refers to the buyer(s) and the supply side refers to the seller(s). A market has two dimensions: 1. spatial dimension – a market might include one buyer or one seller. Or it might include many buyers (or sellers) with a common characteristic, such as a demographic trait (male/female, age group, income group, etc.), a common occupation, a common geographic residence or origin, etc. 2. time dimension – the time period in most market analyses is usually the present time period, which could be in terms of minutes, hours, days, weeks, months, etc.; some markets pertain to the past and others might pertain to the future …when looking at a market, remind yourself of the spatial dimension and the time frame to keep the analysis in perspective. Price and quantity are the two factors upon which economists place primary emphasis. Economists usually represent markets with two-dimensional graphs. The convention is to measure quantity along the horizontal axis and price along the vertical axis. Buyer-side of the market: Law of Demand – a fundamental principle that states that a consumer is willing to buy larger quantities at lower prices and vice-versa. This makes sense…if you go to the store to purchase a bottle of juice and find that the juice is on sale at a lower price than you usually pay, you are inclined to buy more than you would have bought if it wasn’t on sale at the lower price…that is, price and quantity are inversely related: when one increases, the other decreases. Demand schedule – a table that gives various quantities that a consumer(s) is willing to purchase at alternative prices. Demand Curve
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This note was uploaded on 12/03/2011 for the course ECON 101 taught by Professor Smith during the Fall '11 term at North Shore Community College.

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Chapter4 Additional - Chapter 4 Supply and Demand Read this chapter carefully Demand and supply are the two sides of a market The demand side

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