20/08/15
Chapter 2: Supply and Demand
Learning Objective: Explain the Law of Demand verbally.
Markets-Where buyers and sellers come together to carry out an economic transaction.
AT THE CORE OF MARKET THEORY ARE CONCEPTS OF DEMAND AND SUPPLY.
Demand: Quantity of a good or service that consumers are willing and bale to purchase at a given price in a given time period.
- Physical places and online markets where goods/services are exchanged for money.
- Product markets: Goods and services are bought and sold.
- Factor/labor markets: Where factors of production are bought and sold.
- Financial market: Foreign exchange and stock market.
AT THE CORE OF MARKET THEORY ARE CONCEPTS OF DEMAND AND SUPPLY.
Demand: Quantity of a good or service that consumers are willing and bale to purchase at a given price in a given time period.
- Example-Group of people buy 150 chinotos at a price of $1.00, in the afternoon. Demand for chinotos at a $1.00 would be 150 units an afternoon.
The demand schedule shows the quantity of drinks demanded increases as the price falls. Same info can be shown in graphical form, using a demand curve (figure 2.1). Although this diagram is convex, all diagrams you will draw will be straight lines. Change in price will lead to a change in quantity demanded of a product, movement along the curve. The increase in demand is for two reasons:
The non-price determinants of demand: Factors that determine demand and lead to an actual shift of the demand curve, left or right. 1. Income: Change in income affects demand for normal and inferior goods
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- Inferior goods: Demand for the product will fall as income rises and the consumer starts to buy higher priced subsitutues in place of the inferior good. Inferior goods may be cheap wine or "own brand" supermarket detergents. As income rises, the demand curve for the inferior good will shift to the left. When income gets to a certain level, the consumer will be buying only higher priced goods and demand for the inferior good will become zero. Thus the demand curve will disappear. #BALLIN #Yeeeeeeeeeah