Supply & Demand
The terms supply and demand refer to the behavior of people as they interact with one another in competitive markets.
Market
A market is a group of buyers and sellers of a particular good or service. The buyers as a group determine the demand for the product, and the sellers as a group determine the supply of the product.
Competitive Market
Economists use the term competitive market to describe a market in which there are so many buyers and so many sellers that each has a negligible impact on the market price. Each seller of ice cream has limited control over the price because other sellers
Quantity Demand
The quantity demanded of any good is the amount of the good that buyers are willing and able to purchase. one determinant plays a central role�the price of the good.
Law of Demand
This relationship between price and quantity demanded is true for most goods in the economy
Demand Schedule
a table that shows the relationship between the price of a good and the quantity demanded, holding constant everything else that influences how much of the good consumers want to buy.
Normal Goods
If the demand for a good falls when income falls, the good is called a normal good.
Inferior Good
Not all goods are normal goods. If the demand for a good rises when income falls, the good is called an inferior good.
Complements
When a fall in the price of one good raises the demand for another good, the two goods are called complements.
Variables that influence buyer
Variable A Change in This Variable ...
Price of the good itself Represents a movement along the demand curve
Income Shifts the demand curve
Prices of related goods Shifts the demand curve
Tastes Shifts the demand curve
Expectations Shifts the demand curve
Quantity Supplied
The quantity supplied of any good or service is the amount that sellers are willing and able to sell.
Law of Supply
This relationship between price and quantity supplied is called the law of supply: Other things being equal, when the price of a good rises, the quantity supplied of the good also rises, and when the price falls, the quantity supplied falls as well.
Supply Schedule
supply schedule, a table that shows the relationship between the price of a good and the quantity supplied, holding constant everything else that influences how much producers of the good want to sell.
Supply Curve
The curve relating price and quantity supplied is called the supply curve. The supply curve slopes upward because, other things being equal, a higher price means a greater quantity supplied.
Equilibrium
there is one point at which the supply and demand curves intersect. This point is called the market's equilibrium.
Equilibrium price & equilibrium quantity
The price at this intersection is called the equilibrium price, and the quantity is called the equilibrium quantity.
Equilibrium of Supply and Demand
Law of Supply and Demand
How quickly equilibrium is reached varies from market to market depending on how quickly prices adjust. In most free markets, surpluses and shortages are only temporary because prices eventually move toward their equilibrium levels. Indeed, this phenomeno
Summary
Economists use the model of supply and demand to analyze competitive markets. In a competitive market, there are many buyers and sellers, each of whom has little or no influence on the market price.
The demand curve shows how the quantity of a good demand