Bade_Parkin_Macro_Lecture_CH04

Bade_Parkin_Macro_Lecture_CH04 - Demand and Supply CHAPTER...

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Demand and Supply CHAPTER 4
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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 floors, price ceilings, and sticky prices cause surpluses, unemployment, and shortages. 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 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.
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4.1 DEMAND Law of Demand Other things remaining the same, If the price of the good rises, the quantity demanded of that good decreases. If the price of the good falls, the quantity demanded of that good increases.
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4.1 DEMAND Demand Schedule and Demand Curve Demand The 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 quantities at 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 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 Changes in Demand Change in demand A change in the quantity that people plan to buy when any influence other than the price of the good changes. A change in demand means that there is a new demand schedule and a new demand curve.
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4.1 DEMAND The main influences on buying plans that change demand are Prices of related goods Income Expectations Number of buyers Preferences
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4.1 DEMAND Prices of Related Goods Substitute A good that can be consumed in place of another good. For example, apples and oranges. The demand for a good increases , if the price of one of its substitutes rises . The demand for a good decreases , if the price of one of its substitutes falls .
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Complement A good that is consumed with another good. For example, ice cream and fudge sauce. The demand for a good increases , if the price of one of its complements falls . The demand for a good
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This note was uploaded on 04/10/2008 for the course ECO 204 taught by Professor Caporale during the Spring '08 term at University of Dayton.

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Bade_Parkin_Macro_Lecture_CH04 - Demand and Supply CHAPTER...

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