Chapter 2
The demand curve is downward sloping because
a reduction in the price of a good causes individuals to increase their purchase of that good
rightward is an increase in demand
leftward is a decrease in demand
demand curve is also
marginal benefit curve
change in price is
movement along the demand curve
shift in the demand curve
movement of a demand curve right or left resulting from a change in one of the determinants of demand other than the price of the good
market demand curve
plots the total quantity of a good demanded by the market (across all potential buyers) at each price (survey data determines market demand curves)
price, vertical axis
quantity, horizantal axis
other market conditions change
shifts in the demand curve
diminishing marginal benefit
the marginal benefit of each additional item is smaller than the marginal benefit of the previous item
a change in price causes a movement along the demand curve
yielding a change in the quantity demanded
choosing the best quantity to buy
- focus on the marginal benefit of one more (additional benefit of one more) - apply the core principles to make good buying decisions - marginal - smaller decisions - one more -cost-benefit - benefits exceed cost? -opportunity-cost - or what? - compare to next best alternative
6 factors shifting the demand curce
1. income 2. preferences 3. prices of related goods 4. expectations 5. congestion and network effects 6. the type and number of buyers (only shifts market demand)
individual supply curve
A graph plotting the quantity of an item that a business plans to sell at each price. (holds other things constant, downward-sloping)
The rational rule for buyers
buy more of an item if its marginal benefit is greater than (or equal to) the price -follow the rule - increase economic surplus -keep buying until price equals marginal benefit
Law of Demand
consumers will buy more of a good when its price is lower and less when its price is higher