PHYSICS 102 Lecture Notes - Lecture 55: Reservation Price, Normal Good, Inferior Good
Document Summary
Markets, supply, demand and elasticity principles of economics (ch. 3) 13/11/10. Focusing only on the differences in cost of production or on the willingness to pay does not explain the differences in prices of goods and services. Alfred marshall"s model of supply and demand explains variations in prices on the interaction of cost and willingness to pay: the demand curve: Inverse demand curve p=f(q): e. g. p=20-0,1q: market equilibrium: Market equilibrium occurs when the quantity buyer"s demand at the market price is exactly the same as the quantity that sellers offer. All buyers and sellers are satisfied with their respective quantities at the market price (does not mean that buyers would not like to buy for less or sellers would like to sell for more). Increase/decrease in the price of one product causes a rightward/leftward shift in the demand curve for the other: normal good: demand curve shifts rightwards/leftwards when the incomes of buyers increase/decrease, e. g. more expensive properties or food.
