Question | Answer |
Law Of Demand | As Price goes up Quantity Demanded goes down and vice versa |
Law of Supply | As price goes up Quantity Supplied goes up and vice versa |
Change in buyers tastes and preferences.
Change in income.
Change in # of consumers.
Change in prices of related goods.
Change in expectation. | 5 Determinants of Demand |
Change in resource prices.
Change in technology.
Change in taxes and subsidies.
Change in expectations.
Change in # of suppliers.
Change in prices of related goods. | 6 Determinants of Supply |
Change in expectation | The weatherman stated that this summer would be the hottest summer in history. |
Change in Taste or Preferences | Scientists at Columbia University believe that Hawaiian Punch could increase life expectancy. |
Change in income | I got a raise today and I want steak. |
Change in number of consumers | 9 months after prom there were many babies born which increased the demand for diapers. |
Change in Prices of Related Goods | 1 gallon of milk cost me 1 dollar but cereal cost me 10. |
Change in Resource Prices | The price of wood jumped from 50 to 100 so we have to produce less. |
Change in technology | The new chef master 5000 can make any food for any restaurant. |
Changes in taxes and subsidies | The government taxes the paper company a 5 dollar tax for every log the chop down. |
Change in number of suppliers | More drug stores are opening up allowing for more possibly cheaper options |
Normal Goods | A good/service whose consumption increases when income increases and vice versa. (price stays the same) |
Inferior Goods | A good/service whose consumption declines as income increases. |
Complementary Goods | Goods that are usually used or demanded together. |
Substitute Goods | One good that can be used in place of another. |
Complementary goods | What kind of goods are socks and shoes? |
Substitute goods | Chicken is too expensive so I am going to buy turkey |
Inelastic Demand | any value below 1. Demand for these products is relatively insensitive to price changes. Hard to Substitute. |
Elastic Demand | any value above 1. The demand of these products is very sensitive to price changes. Easily substitutable. |
Unit Elastic Demand | any value equaling 1. Equilibrium. |
Luxury Vs. Necessity
Substitutability
% of income
Time | 4 Determinants of Elasticity of Demand |
Time
Substitutability
% of Income
Luxury v. Necessities | Determinant of Elasticity of Supply |
Market Period | Supply cant change |
Short Run | can change supply by altering variable costs |
Long Run | Change in all your costs |
Midpoint Formula | Change in quantity divided by the Sum of Quantites/2
divided by
Change in price divided by the sum of prices/2 |