23115 Lecture Notes - Lecture 2: Normal Good, Inferior Good, Ceteris Paribus
Document Summary
Market forces of supply & demand: markets & competition. Competitive market: each has a negligible impact on market price. The smaller the ability to affect market price, the more competitive. E. g. fruits/vegetables (goods are homogeneous/many buyers & sellers) Monopoly: no competition aka price setter (e. g. city rail: demand. Quantity demanded: amount that buyers are willing and able to purchase. Law of d: qd of good falls when price of good rises (inverse relationship) Ceteris paribus = holding all other factors constant (other than price) A change in the price = movement along the demand curve (change in qd) Normal good = in income leads to increase in demand. Inferior good = in income leads to decrease in demand (potatoes) Substitutes = in price leads to in demand for other (coke v. s. pepsi) Complement = in price leads to demand for other (cars v. s. petrol: supply. Qs of a good rises when the price of a good rises (positive relationship)
