Supply and Demand - SupplyandDemand DEMAND LawofDemand: Substitutioneffect: Incomeeffect:aspricelevels,

Supply and Demand - SupplyandDemand DEMAND LawofDemand:...

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Supply and Demand DEMAND: Law of Demand:   an inverse relationship between price of good and quantity demanded Substitution effect:   as price rises but income level remains unchanged other goods  become relatively cheap so people substitute    Income effect:   as price levels, real income drops … so people don’t buy as much Consumer Surplus:   difference between a buyer pays and what they expect to pay Non Price Factors Population:   An increase in the number of consumers will result in increase in demand Income:   An increase in income will lead to an increase in demand for most goods o Normal Goods:  when people’s incomes increase, more normal goods are  demanded o Inferior Goods:  when people’s incomes decreases, more inferior goods are  demanded Preferences:
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