Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
Demand and Supply Constance Wehner microeconomics Behavior and decision-making of individuals, households and businesses demand desire willingness and ability to pay Law of Demand: the quantity demanded (of a good or service) varies inversely with its price. Representing demand A table of quantities demanded at a variety of prices is a demand schedule Information from a demand schedule is shown on a demand curve Demand curve is always downward sloping (negative) Demand curves can be for an individual or a market Demand schedule & curve Quantity Price demanded 5 10 4 17 3 26 2 38 1 53 Demand & marginal utility (utility means usefulness) marginal utility: extra satisfaction a person gets from one more unit of a product Diminishing marginal utility: extra satisfaction from using additional quantities of a product begins to diminish This will affect the qty demanded A change in quantity demanded always causes movement along the (original) demand curve Causes of change in QTY demanded: Income effect When prices drop & people are relatively “richer”, they can buy more of a good When prices rise & people are relatively “poorer” they cannot buy as much There will be a change in quantity demanded in each case Causes of change in QTY demanded: Substitution effect Consumers tend to replace a more costly item with a relatively less expensive item Good substitutes reduce quantity of more expensive goods demanded Demand elasticity: extent to which a price change causes a change in qty demanded. elastic demand if price change brings relatively larger change in qty demanded inelastic demand results in relatively small change in demand qty when price changes Proportional change in qty demanded to price change is unit elastic Elasticity & profits Inelastic products produce increased revenue with price increases Elastic products will have reduced revenues with price increases Price reductions for elastic products give increased revenues Determinants of elasticity Can purchase be delayed? Adequate substitutes available? Does purchase use a large portion of income? where epsilon is the price elasticity, P is the price of the good, and Q is the quantity demanded for the good Change in Demand (at all prices) Entire demand curve moves Mvt to right is an increase in demand Mvt to left is a decrease in demand Change in demand of multiple people is a shift of the market demand curve Change in demand People buy different quantities of a good at the same price b/c of Income changes consumer tastes substitutes complements changed expectations # of consumers A DIRECT RELATIONSHIP: price and supply provided