Ch. 3 Demand, Supply, and Market Equilibrium
Quantity supplied
Amount of a particular product that a firm would be willing and able to offer for a sale at a particular price
quantity demand
Amount of a product a household would buy in a given period if it could buy all it wanted at the current market place
Inferior good (income and wealth)
An increase in income= decrease in demand (opposites) fast food vs high end restaurants (generic)
What would shift the demand curve for electricity to the right (gas)
An increase in price of natural gas, a substitute source of energy
What factor would increase the demand curve for a normal good to increase shift to right
An increase in the price of the substitute
What would increase demand for tickets to Major League Baseball game
An increase in the price of tickets to professional football game, a substitute for baseball games
Factors that Change demand itself
Any factor not related to to price of product will change the demand
Number of producers in the market
Can affect supply of products
Only factor that changes the quantity demanded
Change in PRICE of good or service
Substitutes in production (prices of related goods)
Cheaper substitutes equals increase in supply
The demand for chicken increases as the result of higher beef prices indicates what?
Chicken and beef are substitutes
The current demand curve for a normal good would increase if:
Consumer income increased
The current demand curve for a product would increase if
Consumers suddenly believed that the price of the food would be sharply higher in the future
Households
Consuming units of the economy, we want the products
As prices increases quantity demand
Decreases
When economists say the demand for a product has decreased they mean
Demand curve has shifted to the left
Technological advances (costs of production) efficiency
Efficiency equals supply increase
Expectations
If a price increases it is predicted consumers will change their buying habit ex-gas, sales, coupons
Normal good(income and wealth)
Increase in income = increase in demand or both decrease (brand names)
Complements in production (prices of related goods)
Increase in price of one product increases production of another product therefore increases supply
Government policies
Increase in taxes = decrease in supply Decrease in taxes=increase in supply
As prices decrease quantity demand
Increases
taste and preferences increase
Increases demand for popular items celeb effect
Technological advances (cost of production) inefficiency
Inefficiency equals a supply decrease
Example of substitution effect (joe)
Joe buys fewer apples and more oranges as the result of an increase in the price of apples
Taste and preference negative
Negative news report decreases demand for a good sickness from food
Demand or supply shifts left
Negative shift
Demand or supply shifts right
Positive shift
Price of inputs decrease (cost of production)
Price decrease = a increase in supply
Price of inputs increase(cost of production)
Price increases equals a decrease in supply
Complements (goods and service)
Price of a product increases the demand decreases for complement (opposite) like price of cookies decrease demand for milk increases
Substitutes (Goods and Services)
Price of product increases in good a so demand increases for good b (decreases)(coke vs Pepsi)
Firms
Produces units of our economy transport resources into products
A change in price changes in
Quantity demand
When price of a good increases the ________ and when the price of a good falls the ___________
Quantity demand decreases and quantity demand increases
Excess demand =
Shortage QD>QS
When the price of a good changes
quantity demanded changes
Excess supply =
surplus QD<QS
If coffee and cream are complements, an increase in the price of coffee will cause
the demand for cream to fall.
product/output markets
the markets in which goods and services are exchanged
Factor (input) markets
the markets in which the resources used to produce goods and services are exchanged
