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Economics (818)
ECON 2310 (47)
B Ferguson (11)
Chapter 2

# Chapter 2- Supply and Demand.pdf

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School
Department
Economics
Course
ECON 2310
Professor
B Ferguson
Semester
Fall

Description
Chapter 2- Supply and Demand September 8, 2013 10:52 AM Definitions Demand Curve- shows how much buyers if the product want to buy at each possible price, holding fixed all other factors the affect demand Substitutes- two products are substitutes, if all else equal, an increase in the price of one of the products causes buyers to demand more of the other product Compliments- two products are compliments, if all else equal, an increase in the price of one of the products causes consumers to demand less of the other product Demand Function- describes the amount of the product that is demanded for each possible combination of its price and other factors Example Formula Inverse Demand Function- the function for a firm's product describes how much the firm must change to sell any given quantity of its product Example Formula Supply Curve- shows how much sellers of a product want to sell at each possible price, holding fixed all other factors that affect supply Supply Function- describes the amount of the product that is supplied for each possible combination of its price and other factors Example Formula Inverse Supply Function- Example Formula Equilibrium Price- the price at which the amounts supplied and demanded are equal Elasticity- the elasticity of Y with respect to X, denoted E equals the percentage change in Y divided by the percentage change in X, or equivalently, the percentage change in Y for each one percent increase in X Price Elasticity of Demand- denoted Ed, equals the percentage change in the amount Price Elasticity of Demand- denoted Ed, equals the percentage change in the amount demanded for each one percent increase in the price Linear Formula Non-Linear Formula Elastic- demand is elastic when the elasticity of demand is less than -1 Inelastic- demand is inelastic when the elasticity of demand is greater than -1 (that is between -1 and 0) Perfectly Elastic- demand is perfectly elastic when the demand curve is horizontal so that the elasticity od demand equal negative infinity Perfectly Inelastic- demand is perfectly inelastic when the demand curve is vertical so that the elasticity of demand is zero Constant Elasticity- (or isoelastic) demand curve has the same elasticity at every price Price Elasticity of Supply- denoted Es, equals the percentage change in the amount supplied for each one percent increase in the price Linear Formula Non-Linear Formula Perfectly Elastic- supply is perfectly elastic when the supply curve is horizontal so that the price elasticity of supply is infinite Perfectly Inelastic- supply is perfectly inelastic when the supply curve is vertical s
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