ECONOM 1014 Chapter 3-5: Curve Notes
Document Summary
A change in input prices does not shift the demand curve. The demand curve is a function that shows the quantity demanded at a range of prices. An increase in the price of complements decreases demand. The market price would rise if the demand for oil increased in the u. s. A vertical demand curve represents a perfectly inelastic demand. The supply curve shows the quantity supplied at various prices. Consumer surplus is the difference between the maximum price the consumer is willing to pay for a good and the market price. Changes in consumer tastes does not shift the supply curve. An increase in supply will reduce the equilibrium price and reduce the equilibrium quantity. A shortage occurs when the quantity demanded is greater than the quantity supplied. When the free market maximizes the total gains from trade, the supply of goods is bought by the buyers with the highest willingness to pay.
