supply and demand pt.3

demand

desire, ability, and willingness to buy a product in the market

law of demand

consumers will buy more of a good when the price is lower and less of a good when it is higher

substitute good

alternate product that is used in place of another

example of substitute

caribou coffee instead of starbucks

complementary goods

products that are consumed togethere

example of complementary good

peanut butter and jelly

what makes someone buy more of the complementary good?

if the cost of one complement decreases, the demand of the complement will decrease

example of why a demand curve will move right

prices rise

example why a demand curve will move left

prices fall

equilibrium

a state where supply and demand are balanced

surplus

supply exceeds demand

normal good

a good that experiences an increase in demand due to an increase in a consumer’s income

elastic

a term describing goods for which consumers react heavily as price slightly changes, such as Pepsi

inelastci

a term describing goods for which consumers react slightly to large changes like gas

factor impacting elasticity

availability of substitutes

tighter government regulations

they decrease growth and flexibility, and increase manufacturing costs

y axis

price

x axis

supply

how does the income effect make us feel poorer if our income doesn’t change?

price increases because we have to buy less

what goods do we buy less of as we make more money

inferior goods