Normal goods
goods that consumers buy more of when their incomes rise, and less of when their incomes drop
Inferior goods
goods consumers demand more of when their incomes drop, and less of when their incomes rise
Income effect
The impact that a price change has on a consumer’s real income
substitution effect
The impact that a change in a product’s price has on it’s relative expensiveness
Law of demand
When P falls, QS goes up, they are opposites
Law of Supply
Producers will try to sell more (goods or services) for higher prices, and less for lower prices
direct relationship between P and QS
factors of supply
TESTOR
TESTOR
Technology- as tech improves, so does supply because producers are able to produce more
Expectations- when producers expect a market to decrease, they will produce more
Sellers- more sellers=more supply
Taxes/substitutes- Taxes decrease production, substitutes increase production
Other goods- As other goods price increase, consumers buy less, which lowers supply (same other way)
Resource prices- when resource prices increase, supply decreases
Factors of demand
BITER
BITER
Buyers- number of consumers
Income- as income changes, goods become normal Vs. Inferior
Taste- what do people consider popular?
Expectations- Do people think the product will soon change in price?
Related goods- Complements or Substitutes
Quantity demanded Vs. Demand
Quantity demanded- specific point on demand curve that has a specific price associated with a specific QD
demand- entire curve that illustrates the relationship between price and quantity
Quantity supplied Vs. Supply
Quantity supplied- Specific point on supply curve that has a specific price associated with a specific QS
supply- entire curve that illustrates the relationship between price and quantity
