The Principles of Economics
Chapter 4: The Market Forces of Supply and Demand
4-1a What Is a Market?
-Organized markets
-Unorganized markets
4-1b What Is Competition?
-Ice cream sellers are aware of how similar their products are to those of other sellers, while buyers know they can choose from a plethora of sellers.
-competitive market: a market in which there are many buyers and many sellers so that each has a negligible impact on the market price.
-A market must ensure that the goods offered for sale are all identical, as well as the reassurance that no buyers or sellers have any influence over the market price.
-Some competitive markets consist of one seller, others consist of multiple.
-Price takers determine the price that buyers and sellers base their market off of.
-Monopolies are markets with one seller who sets a price.
4-2 Demand
4-2a The Demand Curve: The Relationship between Price and Quantity Demanded
-A good's price determined the quantity demanded of a good.
-quantity demanded: the amount of a good that buyers are willing and able to purchase.
-law of demand: the claim that, other things being equal, the quantity demanded of a good falls when the price of the good rises.
-demand schedule: a table that shows the relationship between the price of a good and the quantity demanded.
-demand curve: a graph of the relationship between the price of a good and the quantity demanded.
4-2b Market Demand versus Individual Demand
-The market demand determines the sum of each of the demands for a particular good or service.
-A market demand curve depicts the total quantity demanded of a good varies as the good's price varies.
4-2c Shifts in the Demand Curve
-The demand curve can shift when the quantity being demanded at any given price alters.
Ex. If the American Medical Association revealed that eating ice cream leads to a longer and healthier life, ice scream sales would have a higher demand. This surplus of purchasing larger quantities of ice scream would shift the demand curve for ice scream.
-The demand curve shifts to the right when there's a change that raises the quantity that buyers wish to purchase at any given price (increase in demand).
-The demand curve shifts to the left when any given change lowers the quantity that buyers wish to purchase (decrease in demand).
-A person's income influences their demand for certain products.
-When the demand for a good drops when the income drops it is called a normal good.
-An inferior good is when the demand for a good rises when the income drops.
-normal good: a good for which, other things being equal, an increase in income leads to an increase in demand.
-inferior good: a good for which, other things being equal, an increase in income leads to a decrease in demand.
-substitutes: two goods for which an increase in the price of one leads to an increase in the demand for the other.
-complements: two goods for which an increase in the price of one leads to a decrease in the demand for the other.
4-3 Supply
4-3a The Supply Curve: The Relationship between Price and Quantity Supplied
-quantity supplied: the amount of a good that sellers are willing and able to sell.
-law of supply: the claim that, other things being equal, the quantity supplied of a good rises when the price of the good rises.
-The supplied quantity of a good rises when the price of said good rises, and vise versa.
-supply schedule: a table that shows the relationship between the price of a good and the quantity supplied.
-supply curve: a graph of the relationship between the price of a good and the quantity supplied.
4-3b Market Supply versus Individual Supply
-To get the market supply curve, we must take the sum of the individual supply curves horizontally.
-The market supply curve shows how the total quantity supplied differs as the good's price changes, too.
4-3c Shifts in the Supply Curve
-The market supply curve shifts when one of the factors in holding the supply constant changes.
-In increase in supply can be characterized as a shift in the supply curve to the right, while a shift to the left indicates a decrease in supply.
4-4 Supply and Demand Together
4-4a Equilibrium
-equilibrium: a situation in which the market price has reached the level at which quantity supplied equals quantity demanded.
-equilibrium price: the price that balances quantity supplied and quantity demanded.
-equilibrium quantity: the quantity supplied and the quantity demanded at the equilibrium.
-The denotation for equilibrium is when forces are at balance.
-The equilibrium of a price is often called the market-clearing price.
-surplus: a situation in which quantity supplied is greater than quantity demanded.
-shortage: a situation is which quantity demanded is greater than quantity supplied.
-A surplus is sometimes described as an excess supply of a good.
-A shortage is often referred to as an excess demand.
4-4b Three Steps to Analyzing Changes in Equilibrium
-law of supply and demand: the claim that the price of any good adjusts to bring the quantity supplied and the quantity demanded of that good into balance.
-The amount of products a producer wishes to sell is called the quantity supplied, while the supply itself is the position of the supply curve.
-When there's an increase in demand, the equilibrium price increases.
-A change in supply includes a shift in the supply curve.
-A movement along a fixed supply curve is often called a change in the quantity supplied.
4-5 Conclusion: How Prices Allocate Resources
-Job searching contributes to the supply of labor services.
-The price of a good will determine how much of it is produced and who produces it.
Chapter 4: The Market Forces of Supply and Demand
4-1a What Is a Market?
-Organized markets
-Unorganized markets
4-1b What Is Competition?
-Ice cream sellers are aware of how similar their products are to those of other sellers, while buyers know they can choose from a plethora of sellers.
-competitive market: a market in which there are many buyers and many sellers so that each has a negligible impact on the market price.
-A market must ensure that the goods offered for sale are all identical, as well as the reassurance that no buyers or sellers have any influence over the market price.
-Some competitive markets consist of one seller, others consist of multiple.
-Price takers determine the price that buyers and sellers base their market off of.
-Monopolies are markets with one seller who sets a price.
4-2 Demand
4-2a The Demand Curve: The Relationship between Price and Quantity Demanded
-A good's price determined the quantity demanded of a good.
-quantity demanded: the amount of a good that buyers are willing and able to purchase.
-law of demand: the claim that, other things being equal, the quantity demanded of a good falls when the price of the good rises.
-demand schedule: a table that shows the relationship between the price of a good and the quantity demanded.
-demand curve: a graph of the relationship between the price of a good and the quantity demanded.
4-2b Market Demand versus Individual Demand
-The market demand determines the sum of each of the demands for a particular good or service.
-A market demand curve depicts the total quantity demanded of a good varies as the good's price varies.
4-2c Shifts in the Demand Curve
-The demand curve can shift when the quantity being demanded at any given price alters.
Ex. If the American Medical Association revealed that eating ice cream leads to a longer and healthier life, ice scream sales would have a higher demand. This surplus of purchasing larger quantities of ice scream would shift the demand curve for ice scream.
-The demand curve shifts to the right when there's a change that raises the quantity that buyers wish to purchase at any given price (increase in demand).
-The demand curve shifts to the left when any given change lowers the quantity that buyers wish to purchase (decrease in demand).
-A person's income influences their demand for certain products.
-When the demand for a good drops when the income drops it is called a normal good.
-An inferior good is when the demand for a good rises when the income drops.
-normal good: a good for which, other things being equal, an increase in income leads to an increase in demand.
-inferior good: a good for which, other things being equal, an increase in income leads to a decrease in demand.
-substitutes: two goods for which an increase in the price of one leads to an increase in the demand for the other.
-complements: two goods for which an increase in the price of one leads to a decrease in the demand for the other.
4-3 Supply
4-3a The Supply Curve: The Relationship between Price and Quantity Supplied
-quantity supplied: the amount of a good that sellers are willing and able to sell.
-law of supply: the claim that, other things being equal, the quantity supplied of a good rises when the price of the good rises.
-The supplied quantity of a good rises when the price of said good rises, and vise versa.
-supply schedule: a table that shows the relationship between the price of a good and the quantity supplied.
-supply curve: a graph of the relationship between the price of a good and the quantity supplied.
4-3b Market Supply versus Individual Supply
-To get the market supply curve, we must take the sum of the individual supply curves horizontally.
-The market supply curve shows how the total quantity supplied differs as the good's price changes, too.
4-3c Shifts in the Supply Curve
-The market supply curve shifts when one of the factors in holding the supply constant changes.
-In increase in supply can be characterized as a shift in the supply curve to the right, while a shift to the left indicates a decrease in supply.
4-4 Supply and Demand Together
4-4a Equilibrium
-equilibrium: a situation in which the market price has reached the level at which quantity supplied equals quantity demanded.
-equilibrium price: the price that balances quantity supplied and quantity demanded.
-equilibrium quantity: the quantity supplied and the quantity demanded at the equilibrium.
-The denotation for equilibrium is when forces are at balance.
-The equilibrium of a price is often called the market-clearing price.
-surplus: a situation in which quantity supplied is greater than quantity demanded.
-shortage: a situation is which quantity demanded is greater than quantity supplied.
-A surplus is sometimes described as an excess supply of a good.
-A shortage is often referred to as an excess demand.
4-4b Three Steps to Analyzing Changes in Equilibrium
-law of supply and demand: the claim that the price of any good adjusts to bring the quantity supplied and the quantity demanded of that good into balance.
-The amount of products a producer wishes to sell is called the quantity supplied, while the supply itself is the position of the supply curve.
-When there's an increase in demand, the equilibrium price increases.
-A change in supply includes a shift in the supply curve.
-A movement along a fixed supply curve is often called a change in the quantity supplied.
4-5 Conclusion: How Prices Allocate Resources
-Job searching contributes to the supply of labor services.
-The price of a good will determine how much of it is produced and who produces it.