Lets apply these rules to the following cases of supply and demand Sanjay K

Lets apply these rules to the following cases of

This preview shows page 6 - 10 out of 30 pages.

° Let’s apply these rules to the following cases of supply and demand!
Image of page 6
Sanjay K. Singh Economics I 7 . Movement along the Curve 0 D 1 Price of Cigarettes per Pack Number of Cigarettes Smoked per Day A movement occurs when a change in the quantity demanded is caused only by a change in its price , and vice versa. A C 20 2.00 $4.00 12 . Consumer Income Normal Good $3.00 2.50 2.00 1.50 1.00 0.50 2 1 3 4 5 6 7 8 9 10 12 11 Price of Ice-Cream Cone Quantity of Ice- Cream Cones 0 Increase in demand An increase in income... A shift in the demand curve occurs when a good's quantity demanded changes even though price remains the same. D 1 D 2 Shift in the Demand Curve . Consumer Income Inferior Good $3.00 2.50 2.00 1.50 1.00 0.50 2 1 3 4 5 6 7 8 9 10 12 11 Price of Ice-Cream Cone Quantity of Ice- Cream Cones 0 Decrease in demand An increase in income... D 1 D 2 Shift in the Demand Curve . Prices of Related Goods Substitutes & Complements ² When a fall in the price of one good reduces the demand for another good, the two goods are called substitutes . ² When a fall in the price of one good increases the demand for another good, the two goods are called complements .
Image of page 7
Sanjay K. Singh Economics I 8 . Variables that affect quantity demanded Variables that affect Quantity Demanded A Change in this Variable . . . Price Represents a movement along the demand curve Income Shifts the demand curve Prices of related goods Shifts the demand curve Tastes Shifts the demand curve Expectations Shifts the demand curve . Supply Curve $3.00 2.50 2.00 1.50 1.00 0.50 2 1 3 4 5 6 7 8 9 10 12 11 Price of Ice-Cream Cone Quantity of Ice- Cream Cones 0 The supply curve slopes upward, demonstrating that at higher prices firms will increase output . Market Supply ² Market supply refers to the sum of all individual supplies for all sellers of a particular good or service. ² Graphically, individual supply curves are summed horizontally to obtain the market supply curve. . Movement along the Supply Curve 1 5 Price of Ice-Cream Cone Quantity of Ice- Cream Cones 0 S 1.00 A C $3.00 A rise in the price of ice cream cones results in a movement along the supply curve of ice cream cones .
Image of page 8
Sanjay K. Singh Economics I 9 . Shift in the Supply Curve Price of Ice-Cream Cone Quantity of Ice- Cream Cones 0 S 1 S 2 S 3 Increase in Supply Decrease in Supply A shift in the supply curve occurs when a good's quantity supplied changes even though price remains the same. . Variables that affect quantity supplied Variables that Affect Quantity Supplied A Change in This Variable . . . Price Represents a movement along the supply curve Input prices Shifts the supply curve Technology Shifts the supply curve Expectations Shifts the supply curve . The Market Mechanism ° The market mechanism is the tendency in a free market for price to change until the market clears ° Markets clear when quantity demanded equals quantity supplied at the prevailing price ° Market clearing price – price at which markets clear .
Image of page 9
Image of page 10

You've reached the end of your free preview.

Want to read all 30 pages?

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

Stuck? We have tutors online 24/7 who can help you get unstuck.
A+ icon
Ask Expert Tutors You can ask You can ask You can ask (will expire )
Answers in as fast as 15 minutes