Section 2 Demand and Supply

Demand

the relationship between the price of a product and the quantity of that product that buyers are willing and able to purchase in a specific period time.

Ability

Have to have the necessary funds to spend on that product, have to be able to spend your money on a specific product in order to have demand

Willingness

Need to have the taste and preferences of what to buy.

Time

Specific period of time your buying something.

All other things equal

Everything else besides the price of the quantity that were willing and able to purchase.

Income effect

As the price goes down it increases the purchasing power of your income, allowing you to buy more. It effects your ability.

Substitution effect

Buyers have the incentive to substitute a less expensive good for a more expensive good. Have the incentive to buy the one thats cheaper in price.

Diminishing marginal utility

Having enough of a certain unit but then buying more because they are on sale. I have enough jeans but hollister has their half off so I buy it.

Taste and preferences

Companies want to alter your taste and preferences when they advertise, and they want you to like them. They want to positively impact and influence people. Or when you read that lettuce is contaminated it makes you not want lettuce.

Number of buyers

Impacts the amount of stuff we demand. If the size of a town doubles then you need more stuff but if its a small town you don't need as much and stores could close up.

Changes in income

Increase of income make you want to buy more.

Normal goods

income and demand go in the same direction for normal goods.

Inferior goods

theres an inverse relationship between income and quantity of demand. You get a raise and get a used car instead of a new one, depends where you financially.

Prices of related goods

Substitute goods

Goods we use in place of another. Coke and Pepsi if coke price goes up your going to buy pepsi instead. Direct relationship between the price of a good and the demand for its substitute. Fairlife milk price goes way up so instead I buy mostly oatmilk.

Complimentary goods

Goods that are generally used together(ham and cheese) Inverse relationship between the price of a good and its compliments

Future expectations

whatever what may happen in the future could change demand today, you'll either buy more or less.

Supply

The relationship between the price of a good and the amount of that good or service that producers are willing to produce at a given price. How much buyers are giving us is the price.

Direct relationship between price and supply

Direct relationship between the price of a good and the amount or quantity that were able to produce.

Number of sellers

The more people making potatoes the more potatoes will be produced.

Price of resources

Anything that is easier or cheaper to make increases supply but if its harder to make it supply decreases.

Technology

if our tech diminishes it could be harder to make a good or service which would decrease supply.

Taxes and subsidies

The government increases corporate taxes that decrease supply, of they decrease taxes, supply increases. Subsidy: When the government comes in and pays a company to help them and makes it a lot easier to make things which increases production and supply.

Future expectations

Predicting what people will WANT to buy for the future, like fashion shows, or summer clothes for next summer, or winter clothing.

Prices of public goods

The incentive to go into another good or service that will make them more money.

Own Price elasticity of demand

If the quantity demand is sensitive to change of price is elastic. If you change the price of a good and keep buying the same amount that inelastic.

Elasticity(Ed)

|Percent change in the quantity of good demanded/ percent change in the price of that same good.|

Price is independent variable

If something goes on sale by certain percent were gonna buy more of it and the demand will go up.

If the price goes up we will buy less. The fraction will always be negative and then take the absolute value of it.