2a basics of the market economy

demand

qty of a gd/svc that crs are both willing & able to buy at each possible price during a given period of time, ceteris paribus

qty dd: change in qty due to change in p

determinants of demand

TIGERSIP

tastes & preferences of crs

change in income

• dd of inferior/normal gds

• economic performance (economic boom/recession)

• income tax rate increase, disposable income decrease

government policies

expectations of crs

• p of gd might increase in future, dd increase now

• y might increase in future, confident abt mkt growth & jobs, current dd increase

related gds

• sub & comp in consumption

• derived demand: demand for fop that depends on dd for good which uses it

seasonal factors

interests rate

populations

• size of pop increase, more crs in mkt, dd increase

supply

qty of a gd/svc that producers are both willing & able to sell at each possible price in a given period of time, ceteris paribus

qty ss: change in qty due to change in change in p

determinants of supple

TIGERSO

technology

• improved technology, productivity increase, cop decrease, profits increase, ss increase

input prices

• p of fop decrease, cop decrease, profits increase, ss increase

government policies

• specific tax: fixed amt of tax per gd (ss shift left)

• ad valorem tax: percentage of value of good (ss curve pivot left)

• subsidies: cop decrease, profits increase, ss increase

• regulations: stringent, cop increase, ss decrease

expectation of price

• p increase in future, supply more in future for more revenue, ss now decrease

related goods

• sub & comp n production

sellers in mkt

• more sellers, ss increase

others

• wars, natural disasters