Lecture 3

• Demand

  The amount of good, service or resource that people are willing to buy during the specified period at a specified price
• Quantity demanded

  The amount of a good, service, or resource that people are willing and able to buy during a specified period at a specified price
• Law of Demand

  • If the price of the good rises, the quantity demanded of that good decreases
  • If the price of the good falls, the quantity demanded of that good increases
• Demand schedule

  A list of the quantities demanded at each different price when all the other influences on buying plans remain the same

  
• Demand curve

  A graph of the relationship between the quantity demanded of a good and its price when all other influences on buying plans remain the same

  
• Market demand

  The sum of the demands of all the buyers in a market
• Changes in Demand

  1. Demand decreases, the demand curve shifts leftward

  2. Demand increases, the demand curve shifts rightward
• Main influences on buying plans that change demand

  • Prices of related goods
  • Expected future prices
  • Income
  • Expected future income and credit
  • Number of buyers
  • Preferences
• Substitutes

  Goods that can be consumed in place of another good
• Price of substitutes increases

  Demand for the good increases
• Price of substitutes decreases

  Demand for the good decreases
• Complements

  Goods that are consumed with another good
• Price of complements decreases


  Demand for the good increases
• Price of complements increases


  Demand for the good decreases
• Expected future price of a good increases


  Current demand for that good increases
• Expected future price of a good decreases


  Current demand for that good decreases
• Normal good


  A good for which the demand increases if income increases and demand decreases if income decreases
• Inferior good


  A good for which the demand decreases if income increases and demand increases if income decreases
• Expected future income increases

  Demand for some goods increases
• Expected future income decreases


  Demand for some goods decreases
• Credit is easy to get and cost of borrowing is low


  Demand for some goods increases
• Credit is hard to get and cost of borrowing is high


  Demand for some goods decreases
• Number of buyers increases


  Demand for any good increases
• Preferences change


  Demand for one item increases and demand for another item decreases
• Change in quantity demanded

  A change in the quantity of a good that people plan to buy that results from a change in the price of the good
• Change in demand


  A change in the quantity that people plan to buy when any influence other than the price of the good changes
• Supply


  The amount of a good, service, or resource that people are willing and able to sell during a specified period at a specified price
• Law of Supply


  • If the price of a good rises, the quantity supplied of that good increases
  • If the price of a good falls, the quantity supplied of that good decreases
• Supply schedule


  A list of the quantities supplied at different prices when all other influences on selling plans remain the same
• Supply curve


  A graph of the relationship between the quantity supplied and the price of the good when all other influences on selling plans remain the same
• Market supply


  The sum of the supplies of all sellers in a market
• Changes in Supply


  1. Supply decreases, the supply curve shifts leftward

  2. Supply increases, the supply curve shifts rightward
• Main influences on selling plans that change supply

  • Prices of related goods
  • Prices of resources and other inputs
  • Expected future prices
  • Number of sellers
  • Productivity
• Substitutes in production


  Goods that can be produced in place of another good
• Price of substitutes in production falls


  Supply of the good increases
• Price of substitutes in production rises

  Supply of the good decreases
• Complements in production


  Goods that are produced along with another good
• Price of complements in production rises

  Supply of the good increases
• Price of complements in production falls

  Supply of the good decreases
• Resource and input prices increase


  Quantity supplied of the good decreases