Download Some concepts

Some concepts
• Quantity demanded: the amount of a good or
service that a consumer is willing and able to
purchase at a given price
• Demand curve: a curve that shows the
relationship between the price of a product
and the quantity of the product demanded
• Ceteris Paribus: all else equal
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Some concepts
• Law of demand: holding everything else
constant, when the price of a product falls,
the quantity demanded of the product will
increase, and when the price of a product
rises, the quantity demanded of the product
will decrease
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Distinction between demand and
quantity demanded
• Change in price of a good or service leads to
change in quantity demanded (movement
along a demand curve)
• Change in income, preferences, or prices of
other goods leads to change in demand (shift
of a demand curve)
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3.4 Demand Side of the Market
A Change in Demand versus a Change
in Quantity Demanded
If the price of digital music players falls from
$3.00 to $2.50, the result will be a
movement along the demand curve from
point A to point B—an increase in quantity
demanded from 60 million cans to 70 million
cans.
If consumers’ incomes increase, or if
another factor changes that makes
consumers want more of the product at
every price, the demand curve will shift to
the right—an increase in demand. In this
case, the increase in demand from D1 to D2
causes the quantity of energy drinks
demanded at a price of $3.00 to increase
from 60 million cans at point A to 80 million
cans at point C.
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Some concepts
• Law of supply: holding everything else
constant, increases in price cause increases in
the quantity supplied, and decreases in price
cause decreases in the quantity supplied
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Distinction between supply and
quantity supplied
• Change in price of a good or service leads to
change in quantity supplied (movement along
a supply curve)
• Change in costs, input prices, technology, or
price of related goods and service leads to
change in supply (shift of a supply curve)
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3.5 The Supply Side of the
Market
A Change in Supply versus a Change
in Quantity Supplied
If the price of energy drinks rises from $2.00
to $2.50 per can, the result will be a
movement up the supply curve from point A
to point B—an increase in quantity supplied
by Red Bull, Monster Energy, Rockstar, and
the other firms from 80 million to 90 million
cans.
If the price of an input decreases or another
factor changes that makes sellers supply
more of the product at every price, the
supply curve will shift to the right—an
increase in supply.
In this case, the increase in supply from S1 to
S2 causes the quantity of energy drinks
supplied at a price of $2.50 to increase from
90 million cans at point B to 110 million cans
at point C.