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ECN 104 Lecture Notes - Lecture 2: Demand Curve, Economic Equilibrium, Inferior Good

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School
Ryerson University
Department
Economics
Course
ECN 104
Professor
John Isbister

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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.

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Related Questions

Which of the following is true regarding the​ price-demand relationship?

1. Other factors affecting demand remaining constant, if the price of a good increases its quantity demanded will fall.

2. Change in the price of the good can alone shift its demand curve.

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,

a.

all nonprice determinants of demand are held constant.
b.

only price is held constant.
c.

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.

1. Supply and demand show the relationships between two main variables, price and quantity. How are they depicted in demand, and in supply? What other factors impact the relationships between price and quantity in supply and demand? 

2.If a market is in equilibrium, is it necessarily true that all buyers and sellers are satisfied with the market price? Briefly explain.