Macroeconomics Chapter Summaries From 314, and 16 Chapter 3 – Supply and Demand: An Introduction A market is a setting (physical or virtual) where goods and services can be purchased or sold The price that a good or service is sold is for is determined by the supply and demand for that particular good or service The supply of a product is represented by a supply curve – a schedule showing the quantity that producers are willing to sell their good for at each price over an amount of time. The quantity supplied is different – it represents the amount of a product the producers are willing to sell at a specific price The demand for a product is demonstrated through a demand curve a schedule showing the quantity of a product that consumers are willing buy at each price over an amount of time. The quantity demanded is different – it shows the amount of a product the consumers will buy at a specific price The equilibrium is the point where the supply and demand curves intersect – where both parties are satisfied. This equilibrium point demonstrates the price consumers will buy and producers will sell a product for. It also demonstrates the quantity of a product that consumers will buy and producers will sell where both groups are satisfied. Market equilibrium occurs when all consumers and producers are satisfied with prices and quantities Equilibrium principle – a market in equilibrium leaves no unexploited opportunities for individuals
Efficiency principle – economic efficiency is maximized when total economic surplus is maximized – as the pie grows larger, everyone gets a bigger piece Change in quantity demanded/supplied vs. change in demand/supply : Change in quantity is a response to a change in price (change in the amount people want to buy/sell) and results in a movement along the demand/supply curve A change in demand/supply is not affected by price (people will pay more/less for every quantity) and results in a shift of the demand/supply curve Chapter 4 – Macroeconomics: The Bird’s Eye View of the Economy
Macroeconomic Policies are government actions designed to affect the performance of the economy as a whole (as opposed to policies intended to affect the performance of the market for a particular good or service, such as lumber or haircuts).
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