Economics class notes
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February 6 Notes

The Law Of Demand

Demand is inversely proportional to supply

The more supply the less demand

The quantity demand is the amount of a good that consumers are willing and able to purchase of a product over a given period of time.

The two main reasons consumers buy less of a good after the price increases is the substition effect and the income effect.

The substution effect is when consumers find a substitute good that meets the same needs.

The income effect causes consumers to buy less goods when prices increase.

All Else Equal

Economists use the term Ceteris Paribus meaning “all else equal” to indicate that they are looking at only one economic relationship

Change in a Demand Curve

  • Tastes and preferences (more popular shifts right)
  • income (increase)

    • a normal good is a good you will buy more of if you have more money (shifts right)
    • an inferior good is a good you will buy less of if you have more money (shifts left)
  • The Prices of related goods change (price increase in)

    • in a substitute good will cause an increase of demand of the good
    • in a complimentary good will cause a decrease in demand of the good
  • Expectations -- a predicted shortage that will increase demand

  • Number of Buyers -- more buyers increases demand (duh)