ECON 201 Lecture Notes - Lecture 2: Tax Incidence, Deadweight Loss, Luxury Goods
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13 Jan 2016
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Competitive market - market in which a single buyer or seller has a negligible effect on the price. Perfectly competitive market: a market an individual buyer or seller has no effect on the price. Demand moving along a curve: change 1 of the 2 variable in the graph. Shifting the curve: change some other variable that matters for the market we are studying. Demand curves shift right for normal goods (eg. restaurant meals, steak, good wine) Demand curves shift left for inferior goods (eg. coffee from robusta bean) Demand curve shifts right for substitutes (price of wool sweaters for demand of fleece jackets) Demand curve shifts left for complements (price of gas for demand of cars) Law of demand - price falls, quantity demanded goes up. price rises, quantity demanded goes down. while holding all else everything constant (ceteris paribus)
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