I. Demand- is the quantities that people are willing and able to buy
at various price
-
The Law of Demand- There is an
inverse relationship between price and quantity demanded
-
Causes for Change in Demand
o
change in buyers taste
o
change in the number of buyers
o
change in income (normal, or
inferior goods)
o
change in price of related goods
(substitute, or complimentary goods)
o
change in expectations
-
Elasticity of demand- a measure of
how consumers react to a change in price
-
Elastic Demand- demand changes
greatly given a small change in prices (Greater than 1)
o
Many substitutes
o
Luxury goods
-
Inelastic Demand- if the demand for
it will not change or it changes very little regardless of price (Less than 1)
o
Substitutes
o
Necessary
-
Unitary Elastic- Is equal to 1
-
In order to find the price of
elasticity of demand
o
find the change in quantity
(New-old/old)
o
the change in price (new-old/old)
o
PED (Change in quantity/ Change in
price)
II. Supply- is the quantities that producers or sellers are willing
and able to produce or sell at various prices
-
The Law of Supply- There is a direct
relationship between price and quantity supplied
-
Cause for changes in Supply
o
change in the number of supplies
o
change in taxes
o
change in weather
o
change in technology
o
change in cost of production or
resource prices
o
change in expectations
