APPLIED ECONOMICS (DEMAND)

    Cards (110)

    • The concepts of demand and supply are fundamental principles in economics that describe the relationship between the quantity of a good or service and its price in a market.
    • The income elasticity coefficient can be categorized into different types: normal goods, inferior goods, necessities and luxuries, and zero or very low income elasticity.
    • Demand refers to the quantity of a good or service that consumers are willing and able to purchase at various prices during a specific period.
    • The law of demand states that, all else being equal, as the price of a good or service increases, the quantity demanded decreases, and vice versa.
    • Determinants of demand/factors influencing demand include the price of the product, consumer preferences, income levels, the prices of related goods, and expectations about future prices.
    • The equilibrium, at this point, the market is in balance, and there is no inherent tendency for prices or quantities to change.
    • The interaction of demand and supply in the market leads to the establishment of an equilibrium price and quantity, which are crucial in determining the efficient allocation of resources.
    • Market dynamics are changes in demand or supply that can lead to shifts in the market equilibrium.
    • An increase in consumer income or a change in consumer preferences can shift the demand curve.
    • Changes in production costs or technology can affect the supply curve.
    • When demand exceeds supply, there is typically upward pressure on prices.
    • When supply exceeds demand, there is downward pressure on prices.
    • The price mechanism in a market is often considered the mechanism that brings demand and supply into balance.
    • Prices rise and fall based on changes in demand and supply, guiding resources to where they are most valued in the economy.
    • In business and finance, the gross margin is the difference between revenue and the cost of goods sold (COGS).
    • Gross margin is expressed as a percentage of revenue and represents the profitability of a company's core operations.
    • Profit margin is a broader measure of profitability, taking into account all expenses, including operating expenses, interest, and taxes.
    • The two types of margins are gross margin and profit margin.
    • An increment refers to an increase or addition, often in a systematic or incremental manner.
    • In mathematics or statistics, an increment can be a small positive or negative change in a variable.
    • The concept of population is relevant to the understanding of demand in terms of market size, demographics, consumer preferences, income distribution, cultural and social factors, and population growth or decline.
    • Necessities tend to have inelastic demand because people still need them even if the price increases.
    • In unitary elasticity (elasticity = 1), if the percentage change in quantity demanded is exactly equal to the percentage change in price, the demand is unitary elastic.
    • Elasticity of demand measures how responsive the quantity demanded of a good or service is to changes in price, income, or other factors affecting demand.
    • Factors that can produce a shift in the demand curve include income changes, prices of related goods, tastes and preferences, expectations about future prices or incomes, and population.
    • The broader the definition of the market, the more likely it is that substitutes are available, making demand more elastic.
    • Perfectly inelastic demand is a situation in which the quantity demanded for a good or service remains constant regardless of any changes in its price.
    • Availability of substitutes can affect the elasticity of demand, with demand being more elastic if there are close substitutes for a good or service.
    • The factors that affect the elasticity of demand include availability of substitutes, necessity vs luxuries, time horizon, and definition of the market.
    • In inelastic demand (elasticity < 1), if the percentage change in quantity demanded is less than the percentage change in price, the demand is considered inelastic.
    • The elasticity coefficient can be classified into three main types: elastic demand, inelastic demand, and unitary elasticity.
    • In elastic demand (elasticity > 1), if the percentage change in quantity demanded is greater than the percentage change in price, the demand is considered elastic.
    • Time horizon refers to the change in demand elasticity over time, with demand being less elastic in the short run and more elastic in the long run.
    • Understanding the elasticity of demand is crucial for businesses and policymakers to make informed decisions about pricing strategies, taxation policies, and market interventions.
    • Elasticity of demand helps us understand the sensitivity of consumer demand to changes in these variables.
    • Luxury items often have more elastic demand.
    • Increments are commonly used in analyzing trends or changes over time.
    • The mean, often referred to as the average, is a measure of central tendency.
    • The mean is calculated by adding up all the values in a dataset and dividing by the number of values.
    • Weighted average, in some cases, different values in a dataset may have different weights.
    See similar decks