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Chapter 3 - Supply and Demand.docx

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ECON 101
Corey Van De Waal

Chapter 3 Key terms and ideasCompetitive market o Market that has many buyers and many sellers so no single buyerseller can influence the priceMoney priceo The amount of money needed to buy a goodRelative price o The ratio of its money price to the money price of the next best alternative good o Or opportunity costDemand o If you demand something then youWant itCan afford itHave made a definite plan to buy it o Quantity demanded The amount that consumers plan to buy during a particular time period at a particular price o The Law of DemandOther things remaining the same the higher the price of a good the smaller is the quantity demanded the lower the price of a good the larger is the quantity demandedResults from 1 Substitution effect o When the opportunity cost relative price of a good or service rises people seek substitutes so the quantity demanded of the goodservice decreases 2 Income effect o When the price of a goodservice rises relative to income people cannot afford all they things they previously bought so the quantity demanded of the goodservice decreases o Demand Curve and Demand ScheduleDemand refers to the entire relationship between the price of the good and quantity demandedDemand Curve shows the relationship between the quantity demanded and its price when all other influences on consumers planned purchases remain the same 1 A rise in the price other things remaining the same brings a decrease in the quantity demanded and a movement up along the demand curve
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