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Demand describes
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How much people want and are able to buy under certain circumstances
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Price taker
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When no buyer or seller can affect the market price of something
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What are characteristics of a competitive market?
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- full information
- no transaction costs
- a standardized good
- price-taker
- no transaction costs
- a standardized good
- price-taker
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What happens when there is a shift of the demand curve?
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Non-price determinants affecting the quantity demanded at each price
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When prices of inputs increase, what happens?
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production costs increase
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non-price determinants of demand can be divided into categories including
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- consumer preferences
- number of buyers in the market
- expectations of future prices
- the prices of related goods
- consumers incomes
- number of buyers in the market
- expectations of future prices
- the prices of related goods
- consumers incomes
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a decrease in quantity demanded refers to what?
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a leftward movement on the demand curve
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On the demand curve, where are quantity and price?
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Quantity - x axis
Price - y axis
Price - y axis
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What makes two goods substitutes?
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they serve similar purposes
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Improved what? enables firms to produce more efficiently, using fewer resources to make a given product
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technology
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ceteris paribus is what?
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the first requirement for the law of demand
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ceteris paribus
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'all other things being unchanged or constant'. It is used to rule out the possibility of 'other' factors changing, i.e. the specific causal relation between two variables is focused.
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law of demand
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if all other factors remain equal, the higher the price of a good, the less people will demand that good. In other words, the higher the price, the lower the quantity demanded.
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a perfectly competitive market
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well informed, price-taking buyers and sellers easily trade a good or service
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when there is a shift in the supply curve?
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price changes affect the quantity supplied at each price
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according to the law of demand, price and quantity are related how?
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inversely
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when demand for something increases, the demand shifts how?
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shifts right
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if the demand for good A decreases and the price of good B increases, the two goods are?
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compliments
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if demand decreases as income increases, the good is
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an inferior good
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demand curve
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a graph that shows the quantities of a particular good or service that consumers will purchase at various prices
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market economy
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organized by private decision making individuals
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supply curve
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a graph showing the price quantity combinations from the supply schedule
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normal good
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a decrease in income causes a decrease in demand for the good
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non-price determinants of supply
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prices of related goods, technology, prices of inputs, expectations of sellers and number of sellers
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market equilibrium
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the convergence of supply with demand happens at a point
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market equilibrium shows what
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equilibrium price and equilibrium quantity
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standardized good
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any 2 units have the same features
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all else equal, the demand for good B increases when the price of good A increases
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substitutes
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the benefit of production increases relative to the opportunity cost then the trade off involved in production makes it
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more favorable to produce more
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markets allow for what
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constant communication between buyers and producers using prices as a signal
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when income increase and demand shifts right, the good is what?
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a normal good
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quantity supplied
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the amount of a particular good or service that producers will offer for sale at a given price during a specific period
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when demand changes
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it shifts horizontally
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supply schedule table
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shows the quantities of a particular good or service that producers will supply at various prices
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law of supply
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all else held equal, quantity supplied increases as price increases
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supply
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describes how much of a good or service producers will offer for sale under given circumstances
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if the price of something skyrockets, what happens?
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the demand will shift to the right
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if a new phone battery comes out that is cheaper to produce, what happens?
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supply would shift to the left - equilibrium price decreases and equilibrium quantity increases
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demand schedule
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shows the quantities of a particular good or service that consumers are willing and able to purchase at various prices
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at any price above of below the equilibrium price
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money making incentives drive the market toward the equilibrium price
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market
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buyers and sellers who trade a particular good or service
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when the price of real estate is expected to rise in the future
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the current supply of real estate will decrease
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price of related goods determines supply affects the
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opportunity cost of production
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quantity demanded
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the amount of a particular good that buyers in a market will purchase at a given price during a specified period
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strict licensing required by producers is dropped, what happens
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supply increases
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overall market demand
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all the individual choices of consumers
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in practice, truly perfect competitive markets are
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rare
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demand and the entire curve shifts
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When a non-price factor changes- such as income, expectations, prices of related goods, consumer preferences, or the number of buyers- there is a change in ____________ and ____________________.
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When there is a change in the specific numerical quantity demanded due to a change in price this is referred to as a change in:
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quantity demanded and the demand curve does not shift.
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A supply curve slopes upward because sellers are willing to sell:
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more at higher prices, because they have more revenue than they had when they offered lower prices
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When a non-price factor changes--such as technology, expectations, prices of related goods, prices of inputs, or the number of sellers, there is a change in
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supply and the entire curve shifts
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When there is a change in the amount firms produce due to a change in price, this is referred to as a change in
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quantity supplied and the supply curve does not shift
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When a market is in equilibrium, the
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quantity demanded equals the quantity supplied at the market price
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The market for cell phones reaches equilibrium because cell phone sellers have an incentive
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for prices to rise and some cell phone consumers will not buy at higher prices, driving the price to equilibrium
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equilibrium price is often called the market-clearing price because
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there is neither excess demand nor excess supply
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Suppose an economic boom drives up wages for the sales representatives who work for cell phone companies. This will cause
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supply of cell phones to decrease; the price of cell phones would increase and the quantity of cell phones traded would fall
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Suppose an economic boom causes incomes to increase and, at the same time, drives up wages for the sales representatives who work for cell phone companies. Assume that smartphones are a normal good. This will cause the
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price of cell phones to rise, but the change in the equilibrium quantity is unclear and depends on whether the shift in demand is larger or smaller than the shift in supply
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All of the farmers have their prices posted prominently in front of their stalls
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Full information
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Cucumbers are the same price at each stall
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Participants are price takers
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There is no difficulty moving around between stalls as you shop and choosing between farmers
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No transaction costs
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You and the other customers all seem indifferent about which cucumbers to buy
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Standardized good
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