Sept.18 Demand and Supply
*What is the market? Markets and prices.
A market is any arrangement that enables buyers and sellers to get information
and do business with each other.
We have different kinds of markets.
Monopoly market: many buyers and many sellers. So what a costumer decides
won’t influence price of the market.
On the demand curve, the price does not really mean the real price. It’s a
combination of real price and quantity demanded.
Relative price: the ratio of its money price to the money price of the next best
alternative good...-- opportunity cost
Coffee 4 dollars->8 dollars
Tea 2 dollars->
What’s the relationship between the price and the quantity
demanded.--demand (be illustrated with a demand curve)
The curve shows the demand. But the particular points on the curve shows the
quantity demanded at different prices. When the price changes, the quantity
demanded changes,too. Change in demand: the demand curve will shift to the left or the right.
If the demand curve shifts to the left, then the demand deceases.
If the demand curve shifts to the right, then the demand increases.
Increases/decreases in quantity demanded will be points’ changes on the
demand curve.(it can be a liner or a curve)
*How does a change in price influence demand?
2 forces that influence the increase or decrease of demand:
Substitution effect & Income effect.
When the relative price(opportunity cost) of a good or service increases, people