ECN 104 Lecture Notes - Economic Equilibrium, Demand Curve, Complementary Good
Document Summary
Economic profits cause industries to expand; losses cause industries to contract: competition forces industries to use the least costly production methods. The inverse relationship between price and quantity demanded for any product can be represented on a simple graph, we measure quantity demanded on the horizontal axis and price on the vertical axis. The downwards slope represents the law of demand. The demand curve is also known as marginal benefit curve. The curve tells us the extra benefit the consumer derives from one more unit of a good or service. Physical fitness rises in popularity, increasing the demand for jogging shoes and bicycles; cell phone popularity rises, reducing the demand for traditional phones. A decline in the birthrate reduces the demand for children"s toys. A rise in incomes increases the demand for such normal goods as restaurant meals, sports tickets, and mp3 players while reducing the demand for such inferior goods as cabbage, turnips, and inexpensive wine.
