ECON1101 Chapter Notes - Chapter 6: Normal Good, Inferior Good, Demand Curve
Law of Demand: The tendency for a consumer to demand more of a certain good
or service when the price of that good or services decreases.
Two goods are substitutes when an increase in price of one causes an
increase in the quantity demanded of the other.
-
Two goods are complements when a decrease in price of one causes an
increase in the quantity demanded of the other.
-
What shifts the demand curve to the right?
Successful marketing campaign
-
Decrease in the price of complements
-
An increase in the price of substitutes
-
An increase in income for a normal good
-
A decrease in income for an inferior good
-
A positive shift in consumers' preferences for a good
-
Expectations about increase in future prices that push the buyers to try and
purchase the goods early
-
Population growth
-
Price Elasticity of Demand: The percentage change in the quantity demanded
resulting from a very small percentage change in price. It also measures the
responsiveness of the demand to changes in price.
What changes the elasticity of demand:
Availability of substitutes
-
Definition of goods
-
Income share
-
Time horizon
-
Demand in a Perfectly Competitive Market
Monday, 2 April 2018
8:02 pm
Document Summary
Law of demand: the tendency for a consumer to demand more of a certain good or service when the price of that good or services decreases. Two goods are substitutes when an increase in price of one causes an increase in the quantity demanded of the other. Two goods are complements when a decrease in price of one causes an increase in the quantity demanded of the other. An increase in income for a normal good. A decrease in income for an inferior good. A positive shift in consumers" preferences for a good. Expectations about increase in future prices that push the buyers to try and purchase the goods early. Price elasticity of demand: the percentage change in the quantity demanded resulting from a very small percentage change in price. It also measures the responsiveness of the demand to changes in price.
