chap 1 demand and supply

assumptions of the market

• all goods are homogeneous

• there are many buyers and sellers

• restrict the forces to a single market

• all goods have the same price and consumers are aware of this price prevailing in the market

factors that influence demand

no of consumers

price

preferences

prices of other goods

income

implication of Q= 1000-200p

per every 1 dollar increase in price the quantity demanded of q falls by 200 

shifts in demand curve

when non price factors are included

changes in quantity demanded

movement along demand curve due to price

changes in demand curve

shift in demand curve due to non price factors

factors that influence supply  

price 

cost of production 

no. of producers

no. of buyers

suppliers outside options

Q = 200P - 1000 implication

for every dollar increase in price the amount of quantity supplied rises by 200

as a general rule when there are simulateous shifts in demand and supply

we know the direction of change of either eq price or eq quantity but it is never BOTH

factors that cause eq price and eq q to rise and fall 

size of shift 

slope of curves

price elasticity of demand

ALWAYS NON POSITIVE

price elasticity of supply

ALWAYS POSITIVE