ECN 104 Lecture Notes - Lecture 2: Demand Curve, Economic Equilibrium, Inferior Good
Document Summary
Adam smith"s (1776) invisible hand: nobody is in charge of coordination of market goods. Competitive market: many buyers and sellers for same good or service. Supply and demand model is a model of how a competitive market works [ex. Price is one of the factors affecting the demand of a good. It is only if all other factors affecting demand is held constant and only price is changed. A rise in the quantity demanded at any given price could be caused due to change in some other factors than the price. In this case, shift of the demanded curve occurs. If the changing factor increases quantity demanded at the same price, graph will shift to the right. If the changing factor decreases quantity demanded at the same price, graph will shift to the left. If only thing that changes is price, that is movement along the curve.