For an inferior good the effects of changes in income

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: r good, the effects of changes in income are in the opposite direction to those described above.) Decrease in Increase in demand demand Increase in quantity demanded D1 D0 D2 0 Quantity When the price of the good changes, there is a movement along the demand curve and a change in the quantity demanded, shown by the blue arrows on demand curve D0. When any other influence on buyers’ plans changes, there is a shift of the demand curve and a change in demand. An increase in demand shifts the demand curve rightward (from D0 to D1). A decrease in demand shifts the demand curve leftward (from D0 to D2). animation Review Quiz ◆ 1 2 3 4 5 Define the quantity demanded of a good or service. What is the law of demand and how do we illustrate it? What does the demand curve tell us about the price that consumers are willing to pay? List all the influences on buying plans that change demand, and for each influence, say whether it increases or decreases demand. Why does demand not change when the price of a good changes with no change in the other influences on buying plans? Work Study Plan 3.2 and get instant feedback. 9160335_CH03_p053-080.qxd 60 6/22/09 8:56 AM Page 60 CHAPTER 3 Demand and Supply ◆ Supply If a firm supplies a good or service, the firm 1. Has the resources and technology to produce it, 2. Can profit from producing it, and 3. Plans to produce it and sell it. A supply is more than just having the resources and the technology to produce something. Resources and technology are the constraints that limit what is possible. Many useful things can be produced, but they are not produced unless it is profitable to do so. Supply reflects a decision about which technologically feasible items to produce. The quantity supplied of a good or service is the amount that producers plan to sell during a given time period at a particular price. The quantity supplied is not necessarily the same amount as the quantity actually sold. Sometimes the quantity supplied is greater than the quantity demanded, so the quantity sold is less than the quantity supplied. Like the quantity demande...
View Full Document

Ask a homework question - tutors are online