Chapter 3 Microeconomics

What is the quantity demanded of a product?

Quantity demanded of a product is the total amount that consumers want to purchase in some time period

what’s the difference between quantity demanded and flow variable

quantity demanded is the amount of consumers flowing in for the product for the whole business cycle, while stock is only measured at a single point of time

what is ceteris paribus

it explains the idea of how variables are negatively related. this means if price go up, consumption goes down

what happens to the demand level if the price of a product has gone down

it means there will be a higher demand since consumers are prone to wanting inexpensive deals as its deemed to be a “good deal”

what happens if the price of a product increases

it means that the demand for that product will go down as the good wouldn’t be deemed anymore as a “good deal” since consumers prefer cheaper goods where they can gain the most benefit

what variables causes the demand curve to SHIFT to a new position

1. Consumer’s income

2. Prices of other goods

3. Consumer’s preferences

4. Population

5. Significant changes in weather

“CPCPS”

how does consumer’s income affect the demand curve

Because if consumer’s income increases; then, they would have more purchasing power to demand for goods. However, if the consumer’s income decreases; then, they would have less purchasing power to demand.

How does prices of other goods affect the demand curve?

If prices of other goods increases; then, consumers would be more interested in consuming your goods especially if the good you’re offering can be a substitute for it. However, if prices of other goods become cheaper; then consumers would be less interested in consuming your goods, so demand curve would shift to the left.

How does population affect the demand curve?

If you sell goods in a location with high population, you will have more chances of getting higher demand, causing the demand curve to shift to the right. However, if you sell goods in a location with low population, you will have lower demand, causing the demand curve to shift to the left.

How does significant changes in weather affect the demand curve?

If the weather is good, people are more likely to go out and spend money on good, which increases the demand, causing the demand curve to shift to the right. However, if the weather is bad, people are less likely to go out and spend money on good, decreases the demand, causing the demand curve to shift to the left.

what’s the difference between a change in demand and a change in quantity demanded?

change in demand would result to shifting the entire curve, while change in quantity demanded will just create a movement along the current demand curve

if the root of the change on the demand curve is price, then what type of change will this cause to the demand curve

It will create a movement along the demand curve. This is because the shift in the demand curve will only lead to a change in consumers’ preferences, prices of other goods, consumers’ income, population and significant weather.

What is quantity supplied?

The quantity supplied is the number of products that firms are willing to offer for sale

Is quantity supplied, the amount company were able to sell

No, quantity supplied is the amount that a company is willing to offer for sale

If a company increases their supplies and price level to gain more revenue, will they be able to gain a higher revenue number?

No, because increasing price level and supplies will only lead to quantity demanded decreasing as consumers would not be interested in consuming due to how expensive it is.

what factors will cause the supply curve to shift to a new position?

1. Prices of inputs

2. Technology

3. Taxes or subsidies

4. Competitors’ products

5. Significant changes in weather

6. Number of suppliers

“PTTPSN”

How does prices of inputs affects the supply curve?

If the prices to make goods increases; then, suppliers would be less willing to supply those products, which causes demand curve to shift to the left. However, if the prices to make goods decreases; then, suppliers would take advantage of it and start supplying, which causes supply curve to shift to the right.

How does technology affects the supply curve

If technology becomes more efficient in producing; then, suppliers would be able to produce more, which will cause supply curve to shift to the right. However, if technology becomes less efficient in producing; then, suppliers would only be able to produce a minimal amount, which causes the supply curve to shift to the left.

How does tax deduction affect the supply curve

If government tax businesses less; then, companies would have more remaining money to spend on, which will allow them to have more budget to produce goods causing the supply curve to shift to the right. However, if government tax businesses more; then, companies would have less remaining money to spend on, which will disallow them to produce more goods, causing the demand curve to shift to the left.

How does competitors’ products affects the supply curve?

If competitors’ product is becoming more popular and consumers wanting it more; then, supplier may consider to supply the similar product as the competitor, which causes the supply curve of our current product to go down and create a leftward shift.

How does significant changes in weather affect the supply curve?

If the weather is good all throughout the months; then, producers such as farmers would be more productive and be willing to produce more, which causes the supply curve to shift to the right. However, if the weather is bad; then, producers such as farmers would be less productive and be not be willing to produce, which causes the supply curve to shift to the left.

How does the number of suppliers affect the supply curve?

If there’s more suppliers on a certain product; then, there would be more companies to supply that product, which causes the supply curve to shift to the right. However, if there’s not a lot of companies to produce that product; then, there will be a decrease in supply, causing the supply curve to shift to the left.

what is a market

its any situation in which buyers and sellers negotiate the transaction of some goods or services

in which type of market will you have lower and higher capability of increasing prices?

If you are in a competitive market; then, you would have lower capability to increase your prices as you would most likely need your goods to be cheaper in order to be more attractive in the eyes of the consumers. However, if you are in a market where you are the lone producer of a product or the competition is not high; then, you would higher capability to increase prices since consumers does not have a lot of options to consider.

What is the equilibrium price

its the price level where every seller finds a buyer and every buyer finds a seller

what is equilibrium quantity?

equilibrium quantity is the amount of supplies bought and sold at equilibrium price

what happens to the equilibrium if there’s an increase in demand?

The increase in demand would lead to the equilibrium price to go up because suppliers would want to take advantage of how popular their product is. Also, equilibrium quantity would also increase because suppliers would want to produce more, when their product is popular.

What happens to the equilibrium when there is a decrease in demand?

The decrease in demand would lead to the equilibrium price to go down because businesses would want to decrease their price to make their product more attractive to consumers. Also the equilibrium quantity would go down due to consumers not wanting their product anymore, so they stop producing it.

What happens to the equilibrium when there is an increase in supply

Increase in supply would cause the equilibrium price to decrease because businesses would have excess supply from the increase and they need to make a way to make their product attractive to consumers. Also, the equilibrium quantity would increase due to the sudden increase of supplies.

What happens to the equilibriums when there is a decrease in supply?

Decrease in supply would lead to the equilibrium price to go up due to the limited supplies available for the product, creating a scarcity and increase the equilibrium price. Also, the equilibrium quantity would go down due to the sudden decrease of supplies.

What’s normal goods

Normal goods are the goods that have increase in demand when the income of consumer increases. These normal goods are desirable goods that will see an increase in the demand once the income of consumers increases.

What’s inferior goods

Inferior goods are the good that will have decrease in demand when the income of consumer increases. This is because inferior goods are the less desirable goods that consumers only purchases just to survive, so once they get an increase in income, they would rather purchase normal goods.

what’s substitute goods?

Substitute goods are the type of goods that can replace each other as they may be similar from each other. Therefore, when prices go up, people can rely on that product instead.

What is complementary goods?

Complementary goods are goods that are consumed together, which affects each other when one of their demand goes down or becomes expensive

How do you solve for the equilibrium price and equilibrium quantity?

1. Align the equation of equilibrium quantity and equilibrium price using the formula of Qd = Qs, in which Qd = a - bP and Qs = c + dP

2. Solve for the P part of the equation by isolating the variable to get the equilibrium price

3. Use the equilibrium price in the equation of Qd = a - bP and Qs = C + dP to find the equilibrium quantity

4. The number you will get from Qd must equal to the number of Qs in order to get the correct equilibrium quantity since you would need Qd to equal to Qs

If your given a problem of a supply and demand schedule and you need to solve how much things were actually done, how would you figure it out

You would have to compare the amount of supply and demand for a particular year and see which one has the lower number. This is because selecting a number that’s higher is not feasible as consumers can only afford what they can buy and suppliers can only produce what they can make.