02 Demand and Supply (Part 1)

• The demand is a relation showing the quantities of a good that consumers are willing and able to buy per period at various prices, other things held constant (ceteris paribus).
• Individual demand is the demand of an individual consumer.
• The market demand is the sum of the individual demands of all consumers in the market.
• A demand schedule is a table showing the relationship between prices and the specific quantities demanded at each.
• A demand curve is a curve or line showing the quantities of a particular good demanded at various prices during a given period, other things constant.
• The market demand curve is the sum of the individual demand curves for all consumers in the market.
• The quantity demanded is the amount demanded at a particular price. It is the specific amount of the good on the demand schedule or demand curve.
• The Law of Demand states that the quantity of demanded products per period relates inversely to their price, other things constant (ceteris paribus).
• The substitution effect is felt when a product’s price changes demand due to people buying and consuming other substitute goods.
• The income effect is felt when a product’s price changes a consumer’s real income or purchasing power (the capacity to buy within a given income).
• Marginal utility is the change in total economic utility (or simply utility) resulting from a one-unit change (meaning buying more than one) when you consume a product or service
• Economic utility is the amount of satisfaction a consumer receives from the consumption of a product or service.
• The Law of Diminishing Marginal Utility states that the more of the product or service an individual consumes per period, other things constant (ceteris paribus), the smaller the marginal utility of each additional unit consumed.
• Examples of applications of Diminishing Marginal Utility:

  • Restaurants that have all-you-can-eat specials
  • Having a second copy of today’s newspaper
• The demand function shows the relationship between the demand for a commodity and the factors (product’s price, prices of related products, level of income, taste, preferences, etc.) that determine or influence this demand. It is expressed as a mathematical function
• Taste or preference is consumers' personal likes or dislikes for certain goods and services.
• Changing Incomes - An increase in one’s income increases an individual's capacity or power to demand products or services that they cannot buy due to having a lower income.
• Where there is an increase in income, there is an increase in the demand for normal goods, with the demand curve shifting to the right. Most goods are said to be normal goods.
• When there is an increase in income, there is a decrease in demand for inferior goods. Consumers switch to normal goods from inferior goods.
• Population Change - An increase in the demand for some goods or services, particularly for basic goods, results from an increasing population. There is a decline in demand due to a decrease in population
• Occasional or Seasonal Products - Various events and seasons within the year may cause a movement on the demand curve for specific goods.
• Substitute and Complementary Goods - Substitute goods are interchanged with another good, usually offered at a lower price, thus making them more attractive to customers. Complementary goods complement each other, and one good cannot exist with the other good.
• Expectations of Future Prices - If customers expect the price of a product or service to increase (or decrease) in the future, it may lead to an increase (or decrease) in current demand
• The supply is a relation showing the quantities of goods producers are willing and able to sell at various prices at a given period, and other things are held constant.
• he individual supply is the supply of an individual producer.
• The market supply is the supply from all producers in the market for that good.
• A supply schedule is a table listing the various prices of a product and the specific quantities supplied at each of these prices at a given time
• A supply curve is a curve or line showing the quantities of a particular good supplied at various prices during a given period and other things held constant
• The market supply curve shows the total quantities of all producers at various prices
• The quantity supplied is the amount offered for sale at a specific price, as shown by the point on the given supply curve.
• The Law of Supply states that the quantity of product supplied during a period is usually directly related to its price, other things constant (ceteris paribus).
• A supply function is a mathematical notation that links the dependent variable, quantity supplied (QS), with various independent variables that determine quantity supplied