ECON 102 Chapter Notes - Chapter 3: Demand Curve, Inferior Good, Normal Good

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Competitive market - market in which there are many buyers and sellers of the same good or

service, none of whom can influence the price at which the good or service is sold

Supply and demand model - a model of how competitive market behaves

Demand schedule - shows how much of a good or service consumers will want to buy at

different prices

Quantity demanded - actual amount of a good or service consumers are willing to buy at some

specific price

Demand curve - graphical representation of the demand schedule

Law of demand - higher price of a good or service, all other things equal, leads people to

demand a smaller quantity of that good or service

Shift of the demand curve - change in the quantity demanded at any given price, denoted by a

new demand curve

Movement along the demand curve - change in the quantity demanded arising from a change

in the good’s price

Substitutes - rise in the price of one good leads to an increase in demand in the other good

Complements - rise in the price of one good leads to a decrease in demand in the other good

Normal good - rise in income leads to rise in demand

Inferior good - rise in income leads to fall in demand

Individual demand curve - illustrates the relationship between quantity demanded and price for

an individual consumer

Quantity supplied - actual amount of a good or service people are willing to sell at some

specific price

Supply schedule - shows how much of a good or service would be supplied at different prices

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ECON 102 Full Course Notes

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Competitive market - market in which there are many buyers and sellers of the same good or service, none of whom can influence the price at which the good or service is sold. Supply and demand model - a model of how competitive market behaves. Demand schedule - shows how much of a good or service consumers will want to buy at different prices. Quantity demanded - actual amount of a good or service consumers are willing to buy at some specific price. Demand curve - graphical representation of the demand schedule. Law of demand - higher price of a good or service, all other things equal, leads people to demand a smaller quantity of that good or service. Shift of the demand curve - change in the quantity demanded at any given price, denoted by a new demand curve. Movement along the demand curve - change in the quantity demanded arising from a change in the good"s price.

Related Questions

1. In a competitive market, the quantity of a product produced and the price of the product are determined by

a. buyers.

b. sellers.

c. both buyers and sellers.

d. None of the above is correct.

2. Which of the following statements is correct?

a. Buyers determine supply and sellers determine demand.

b. Buyers determine demand and sellers determine supply.

c. Buyers determine both demand and supply

d. Sellers determine both demand and supply

3. The demand for a good or service is determined by

a. those who buy the good or service

b. the government.

c. those who sell the good or service.

d. both those who buy and those who sell the good or service.

4. An increase in supply is represented by

a. a movement downward and to the left along a supply curve.

b. a movement upward and to the right along a supply curve.

c. a rightward shift of a supply curve.

d. a leftward shift of a supply curve

ceruleanseal203

Discussion #1

The law of demand states that a fall in the price of a good raises the quantity demanded, and the increase in price leads to a decrease in quantity demanded. The price elasticity of demand measures the responsiveness of the quantity demanded to a change in price. Demand for a good is said to be elastic if the quantity demanded responds substantially to changes in the price, and the percentage change in quantity demanded is greater than the percentage change in price. Demand is said to be inelastic if the quantity demanded responds only slightly to changes in the price, which indicates that the percentage in price is greater than the percentage in quantity demanded.

However, the extent of responsiveness of quantity demanded to a change in price depends on the nature of a particular good or service in the market. The price elasticity of demand partly depends on the availability of close substitutes. When a large number of substitutes are available, consumers respond to a higher price of a good by buying more of the substitute goods and less of the relatively more expensive good. In addition, goods or services that are considered necessities tend to have less elastic (more inelastic) demand, whereas goods or services that are considered luxuries have more elastic (less inelastic) demands.

Explain why the demand for the good or service provided by the organization you work for is elastic or inelastic. How does this influence pricing decisions?
Provide examples on how the availability of close substitutes affects price elasticity of demand.
Give specific examples of necessities or luxuries, and explain how they affect price elasticity of goods or services.

Please answer ALL bulletins and place the answers under the correct bulletin.

The market demand curve

a. slopes upward.

b. is found by vertically adding the individual demand curves.

c. represents the sum of the quantities demanded by all the buyers at each price of the good.

d. represents the sum of the prices that all the buyers are willing to pay for a given quantity of the good.

When we move along a given demand curve,

all nonprice determinants of demand are held constant.

only price is held constant.

all determinants of quantity demanded are held constant.

d. income and price are held constant.

When the price of a good or service changes,

	a.	there is a movement along a given demand curve.
	b.	the demand curve shifts in the opposite direction.
	c.	the supply curve shifts in the opposite direction.
	d.	the demand curve shifts in the same direction.

ECON 102 Chapter Notes - Chapter 3: Demand Curve, Inferior Good, Normal Good

ECON 102 Full Course Notes

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