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KAIROS REVIEW
EXAMPLES
NORMAL
INFERIOR
NORMAL GOODS
INFERIOR GOOD
VS NORMAL GOOD
Good X is the inferior good
Good Y is the normal good
DEMAND CURVE
A Change in Demand:
.
Notice as price goes
down my demand for
coffee increases
Notice that its an actual
shift of the demand curve
DEMANDS AKA:
Is a schedule or a curve showing the amount of a
product that buyers are willing and able to purchase, in
a particular time period, at each possible price in a
series of prices.
LAW OF DEMAND
Other things held equal, ceteris paribus, the quantity
of a good purchased varies inversely with the price
RELATED GOODS
SUBSTITUTE GOOD
COMPLEMENTARY GOOD
DETERMINANTS OF DEMAND
A change in buyers:
SUPPLY CURVE
A Change in Supply:
DETERMINANTS OF SUPPLY
A change in supply due to a change in:
Resource Prices: i.e. micro processors become cheaper
Tech: i.e. when cable internet was introduced
Taxes and Subsidies: i.e. raise, tax on tobacco
Change in the prices of other goods or substitution of production: i.e. when the
price of cucumbers increase, then the supply of watermelons decreases
Consumer expectations: i.e. a substantial increase in the future price of logs will
decrease the supply of logs today
Notice that its an actual
shift of the supply curve
.
Notice as the price
increases, suppliers will
produce more quantities.
LAW OF SUPPLY
Other things held equal, ceteris paribus, the quantity
of a good supplied varies directly with its price
MARKET EQUILIBRIUM
The intersection of the
downward sloping demand
curve and the upsloping
supply curve indicates the
equilibrium price and
equilibrium quantity.
COMPARATIVE MARKETS:
PRODUCTIVE EFFICIENCY
ALLOCATIVE EFFICIENCY
The production of a
particular mix of goods and
services most highly valued
by society
Effects on
EQ price
Effects on
EQ quantity
Increase
Decrease
Decrease
Indeterminate
Decrease
Increase
Increase
Indeterminate
Increase
Increase
Indeterminate
Increase
Decrease
Decrease
Indeterminate
Decrease