Economics Exam 2

Number of Buyers

when the number of buyers increase the demand increase, number of buyers decrease demand decrease

Taste and Preference

when the taste or preference for a commodity improves the demands increase

Substitutes

If a price increase for one good leads to an increase in demand for a related good, then the two goods are considered substitutes. An increase in beef prices, for example, followed by higher demand for chicken or pork, indicates that chicken or pork represent substitutes for beef

Demand curve

the relationship between prices and quantities of demand

increase in quantity of supply

An increase in quantity of supply is movement ALONG the supply curve to the right , a decrease in quantity of supply is movement along the supply curves to the left.

Change in quantity of demand

Change in quantity of demand directly results of change in price

Complements

Complements are goods which are used in combination with one another. Peanut butter and jelly are complementary items. If the price of peanut butter goes up, people will buy less peanut butter and less jelly because peanut butter and jelly are typically purchased together. Cheese and butter are complements to bread, and if their price falls, the demand for bread may increase. With goods complementary goods such as DVD players and DVD videos, when there is a decrease in the price of DVD players, there will be an increase in the demand for DVD players bought, leading to an increase in market demand for DVD videos. The cross price elasticity of demand for two complements is negative.

Demand slope

Demand slope is negative because of the law of demand

Price

Increase in demand make the demand curve shift right Decrease in demand makes the demand curve shift left Wherever there is a change in demand we assume that all prices are constant . Anytime there is a change in quantity of demand there is a movement Along the demand curve

Inferior Good

Increase in income is a decrease in demand Decrease in income is increase in demand

Supply curve

Supply curve is a graphical relationship between price and quantity supply

Supply curve

Supply curve is positively sloped because the law of supply

Normal Good

results in an increase income an Increase in Income the Demand Curve Shift Right a Decrease in income demand curve shift left