APPLIED ECONOMICS (DEMAND)

• 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.