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Demand and supply

demand:

the amount that buyers are willing and able to buy (effective demand)

the law of demand:

the law of demand says price and quantity demanded are inversely related (e.g., the cheaper something is, the more we will buy)

  • if the price of a good gets higher, we might:
    • buy less of it
    • do without it
    • buy something else (a substitute)
  • if the prices of a good gets cheaper, we mightL
    • buy more of it
    • stop buying a substitute and buy this instead

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factors that affect demand

  • fashion/taste

  • income

  • price of substitutes (good in competitive demand)

  • price of complements (good in joint demand)

  • population

  • advertising

  • price of products

    demand curve

supply:

the amount of a product a firm is willing and able to supply a market at a given price

law of supply:

the price and quantity sold have a positive relationship (e.g., as the price increases, the firm looks to supply more)

factors that affect supply:

  • cost of raw materials

  • price selling at

  • taxes

  • cost of labour

  • new technology

  • weather

  • changes in the size of the industry

    supply curve

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