what is demand?
Demand is the quantities of goods that consumers are willing and able to buy at different prices
What is the Law of Demand?
There is an INVERSE relationship between price and quantity demanded
As price falls quantity demanded rises
...
Changes in demand
Changes in price don't shift the curve but people want more
Demand curve for one good can be affected by a change in the price of ANOTHER related good
Replacement- if the price of one increases the demand for the other will increase.
Ex. If prices of pepsi falls, demand for coke will decrease
Complemantary good-used together
If the price of one increase, the demand for the other will fall
Ex: If price of skis falls, demand for ski boots will increase
Incomes of consumers change demand but depends on the type of good
Normal goods. As income increases, demand increases. Ex. Luxury cars, jewelry, homes
Inferior goods. As income increases, demand falls. Ex. Ramen, used cars, used clothes
What is supply?
Supply is the different quantities of a good that sellers are willing and able to sell at different prices
What is law of supply?
There is a direct relationship between price and quantity supplied
As price increases, the quantity producers make, increases
As price falls, the quantity producers make falls
...
Price floor
Lowest legal price that can be changed for a product
Ex.minimum wage
Price ceiling
Maximum legal price that can be changed for a product
Ex. Apartment rents
How do you calculate your total cost?
# divided by total income �100
Explain why time is the biggest factor in determining elasticity of supply
Producers take some time to adjust their capacity to changes in demand thus supply will increase considerably
what is demand?
Demand is the quantities of goods that consumers are willing and able to buy at different prices
What is the Law of Demand?
There is an INVERSE relationship between price and quantity demanded
As price falls quantity demanded rises
...
Changes in demand
Changes in price don't shift the curve but people want more
Demand curve for one good can be affected by a change in the price of ANOTHER related good
Replacement- if the price of one increases the demand for the other will increase.
Ex. If prices of pepsi falls, demand for coke will decrease
Complemantary good-used together
If the price of one increase, the demand for the other will fall
Ex: If price of skis falls, demand for ski boots will increase
Incomes of consumers change demand but depends on the type of good
Normal goods. As income increases, demand increases. Ex. Luxury cars, jewelry, homes
Inferior goods. As income increases, demand falls. Ex. Ramen, used cars, used clothes
What is supply?
Supply is the different quantities of a good that sellers are willing and able to sell at different prices
What is law of supply?
There is a direct relationship between price and quantity supplied
As price increases, the quantity producers make, increases
As price falls, the quantity producers make falls
...
Price floor
Lowest legal price that can be changed for a product
Ex.minimum wage
Price ceiling
Maximum legal price that can be changed for a product
Ex. Apartment rents
How do you calculate your total cost?
# divided by total income �100
Explain why time is the biggest factor in determining elasticity of supply
Producers take some time to adjust their capacity to changes in demand thus supply will increase considerably