Microeconomics Chapter 2
The Law of Demand
-Inverse negative relationship -P and Qd -Ceterious Paribus -P increase D decrease -P decrease D increase
Non-price Determinants of Demand
-Tastes and preference, the # of buyer and buyer expectations -Prices or related good, complement and substitutes
Goods
A tangible product that consumers, firms, or governments wish to purchase
Inferior goods
An increase in income decrease demand, a decrease in income is an increase in demand (Indirect relationship between income and demand)
Normal goods
An increase in income, increase in demand, an decrease income, decrease in demand (Direct Relationship between income and demand)
Services
An intangible product and action that consumers, firms, governments wish to purchase
Market
Any place where or mechanism by which buyers and sellers interact to trade goods, services, or resources
Market Demand
Based on the overall preferences of everyone in the market
Decrease in Demand
Curve shifts left
Increase in demand
Curves shifts right
Demand Curve
Graphical representation of a relationship between price of goods, service, resources and quantity that people or firms are willing and able to buy ALL ELSE IS HELD CONSTANT
Three reasons Demand slopes down
Income Effect Diminishing Marginal Utility Substitutional Effect
Service
Intangible product or action that consumer, firms, or governments wish to purchase
The law of demand
Lower prices lead to higher demand -Demand curve slopes down -Supply curve slopes up
Prices
Mechanism for allocating goods, services, resources. determined by the interaction of numerous buyers and sellers
Diminishing Marginal Utility
Negative relationship between the quantity of a good, service, or resource and must obtain from each additional unit consumed in a given period of time
Formal
New York Stock Exchange Local retail sale
Diminishing Marginal Utility
People consuming more at a fixed time the satisfaction received from each additional unit falls
Consumers expectations
Play a crucial role in determining the demand for a good or services at different points in time.
Quantity Demanded
Quantity of a goods, services, or resources that customers, firms, and government are willing and able to buy at a given price ALL ELSE HELD CONSTANT
Informal
Swap meets Garage sales
Demand Schedule
Tabular representation of the relationship between the price of a good, service, or resources and the quantity that individuals and firms are willing and able to buy ALL ELSE HELD CONSTANT
A Change in the Quantity Demanded
The change in quantity of a goods, services, or resources that customers, firms, and government are able to buy due to a change in its price
Income Effect
The effect that a change in the price of a good, service, or resources has on the purchasing power of income
Substiitution Effect
The effect that a change in the price of one good service, or resource has on demand of another
Sellers
charge the highest price possible
Compliments
goods that are sold together (hot dogs and hot dog buns)
Buyers
pay lowest price possible