Chapter #4: Market Forces of Supply and Demand

Demand Schedule

table showing distinct relationship between the price of a good and the quantity demanded

Quantity Demanded

 amount of the good the buyers are willing and able to purchase

Quantity Demanded in the Market

the sum of the quantities demanded by all buyers at each price

• Individual demand → market demand

Increase in Demand

 shifts demand right (horizontally) → higher quantity demanded at every price

Decrease in Demand

shifts demand left (horizontally) → lower quantity demanded at every price

Normal Goods

higher income causes an increase in demand (when income increase, the demand curve shifts right due to addition income as you are willing to purchase additional units)

Inferior Goods

higher income causes a decrease in demand

Substitutes

goods that fulfill the same need; demand of a good will increase if the price of the substitute good rises

Complements

goods that are used together; demand for a good will decrease if the price of a complement good rises

Expect an Increase

demand for a good will increase if a price increase or income increases expectedly

Expect a Decrease

demand for a good will decrease if a price or income decreases is expected

Market Demand

depends on the number of buyers; associated change in demand if there is a change in number of buyers

Quantity Supplied in the Market

the sum of the quantities supplied by all sellers at each price

• Individual supply → market supply

Increase in Supply

rightward shift → higher quantity supplied at every price

Decrease in Supply

leftward shift → lower quantity supplied at every price

Supply Shifts Right

increase in technology, price increases, more sellers in market, etc

Supply Shifts Left

decrease in technology, price falls, less sellers in market, etc