×

### Let's log you in.

or

Don't have a StudySoup account? Create one here!

×

or

## Microeconomics Notes | Chapter III | Week IV

by: Alana Notetaker

14

0

6

# Microeconomics Notes | Chapter III | Week IV EC 201

Marketplace > North Carolina State University > Economcs > EC 201 > Microeconomics Notes Chapter III Week IV
Alana Notetaker
NCS

Get a free preview of these Notes, just enter your email below.

×
Unlock Preview

These notes cover demand and supply curves and market equilibrium.
COURSE
Princ of Microecon
PROF.
Allison Lowe Reed
TYPE
Class Notes
PAGES
6
WORDS
CONCEPTS
Microeconomics, Economics
KARMA
25 ?

## Popular in Economcs

This 6 page Class Notes was uploaded by Alana Notetaker on Saturday February 6, 2016. The Class Notes belongs to EC 201 at North Carolina State University taught by Allison Lowe Reed in Spring 2016. Since its upload, it has received 14 views. For similar materials see Princ of Microecon in Economcs at North Carolina State University.

×

## Reviews for Microeconomics Notes | Chapter III | Week IV

×

×

### What is Karma?

#### You can buy or earn more Karma at anytime and redeem it for class notes, study guides, flashcards, and more!

Date Created: 02/06/16
Microeconomics Alana Farris Chapter III— Where Prices Come From: The Interaction of Supply and Demand I. The Demand Side of the Market A. Demand Schedules and Demand Curves 1. Quantity Demanded: the amount of a good or service that a consumer is willing and able to purchase at a given price 2. Demand Schedule: a table that shows the relationship between the price of a product and the quantity of the product demanded 3. Demand Curve: a curve that shows the relationship between the price of a product and the quantity of the product demanded 4. Market Demand: the demand by all the consumers of a given good or service B. The Law of Demand and its Explanation 1. The Law of Demand: the rule that, holding everything else constant, when the price of a product falls, the quantity demanded will increase and vice versa 2. explained by: a) Substitution Effect: the change in the quantity demanded of a good that results from a change in price making the good more or less expensive relative to other goods that are substitutes b) Income Effect: the change in the quantity demanded of a good that results from the effect of change in the good’s price on consumers’ purchasing power C. Holding Everything Else Constant: The Ceteris paribus Condition 1. Ceteris paribus (“all else equal”) Condition: the requirement that when analyzing the relationship between two variables other variable must be held constant 2. a shift of a demand curve is an increase or decrease in demand 3. a movement along a demand curve is and increase or decrease in the quantity demanded Microeconomics Alana Farris D. Variables that Shift the Market Demand 1. INCOME — the income that consumers have available to spend affects their willingness and ability to buy a good a) Normal Good: a good for which the demand increases as income rises and decreases as income falls b) Inferior Good: a good for which the demand increases as income falls and decreases as income rises 2. PRICES OF RELATED GOODS — the prices of other goods can affect consumers’ demand for a product a) Substitutes: goods and services that can be used for the same purpose b) Compliments: goods and services that are used together 3. TASTES — a catchall category that refers to the many subjective elements that can enter into a consumer’s decision to buy a product a) consumers can be inﬂuenced by an advertising campaign for a product 4. POPULATION AND DEMOGRAPHICS — a) Demographics: the characteristics of a population w respect to age, race, and gender 5. Expected Future Prices II. The Supply Side of the Market A. Supply Schedule and Supply Curves 1. Quantity Supplied: the amount of a good or service that a ﬁrm is willing and able to supply at a given price 2. Supply Schedule: a table that shows the relationship between the price of a product and the quantity of the product supplied Microeconomics Alana Farris 3. Supply Curve: a curve that shows the relationship between the price of a product and the quantity of the product supplied B. The Law of Supply 1. Law of Supply: the rule that, holding everything else constant, increases in price cause increases in the quantity supplied, and decreases in price cause decreases in the quantity supplied C. Variables that Shift the Market Supply 1. PRICES OF INPUTS — when the price of an input (anything used in the production of a good or service) changes 2. TECHNOLOGICAL CHANGE — a positive or negative change in the ability of a ﬁrm to produce a given level of output with a given quantity of inputs 3. PRICES OF SUBSTITUTES IN PRODUCTION — ﬁrms choose which product they are going to produce based on the price of that product 4. NUMBER OF FIRMS IN THE MARKET — when new ﬁrms enter a market, the supply curve shifts right and vice versa when ﬁrms exit a market 5. EXPECTED FUTURE PRICES — if a ﬁrm expects that the price of its product will be higher in the future, it has incentive to decrease supply now and increase it in the future III.Market Equilibrium: Putting Demand and Supply Together A. The model of supply and demand assumes that we are analyzing a perfectly competitive market 1. Perfectly Competitive Market: a market that meets the conditions of: a) many buyers and sellers b) all ﬁrms selling identical products c) no barriers to new ﬁrst entering the market Microeconomics Alana Farris 2. Market Equilibrium: a situation in which quantity demanded equals quantity supplied 3. Competitive Market Equilibrium: a market equilibrium with many buyers and sellers B. How Markets Eliminate Surpluses and Shortages 1. Surplus: a situation in which the quantity supplied is greater than the quantity demanded a) ﬁrms have unsold goods piling up, giving them incentive to increase their sales by cutting the price b) cutting the price simultaneously increases the quantity demanded and decreases the quantity supplied 2. Shortage: a situation in which the quantity demanded is greater than the quantity supplied a) some consumers will be unable to purchase a product at the current price, and ﬁrms realize they can increase the price without losing sales b) a higher price will simultaneously increase the quantity supplied and decrease the quantity demanded Week III Chapter 3 MICROECONOMICS VOCAB 1. COMPETITIVE MARKET EQUILIBRIUM: a market equilibrium with many buyers and sellers 2. COMPLIMENTS: goods and services that are used together 3. DEMAND CURVE: a curve that shows the relationship between the price of a product and the quantity of the product demanded 4. DEMAND SCHEDULE: a table that shows the relationship between the price of a product and the quantity of the product demanded 5. DEMOGRAPHICS: the characteristics of a population w respect to age, race, and gender 6. INCOME EFFECT: the change in the quantity demanded of a good that results from the effect of change in the good’s price on consumers’ purchasing power 7. INFERIOR GOOD: a good for which the demand increases as income falls and decreases as income rises 8. MARKET EQUILIBRIUM: a situation in which quantity demanded equals quantity supplied 9. NORMAL GOOD: a good for which the demand increases as income rises and decreases as income falls 10. PERFECTLY COMPETITIVE MARKET: a market that meets the conditions of (1) many buyers and sellers, (2) all ﬁrms selling identical products, and (3) no barriers to new ﬁrst entering the market 11. QUANTITY DEMANDED: the amount of a good or service that a consumer is willing and able to purchase at a given price 12. QUANTITY SUPPLIED: the amount of a good or service that a ﬁrm is willing and able to supply at a given price 13. SHORTAGE: a situation in which the quantity demanded is greater than the quantity supplied 14. SUBSTITUTION EFFECT: the change in the quantity demanded of a good that results from a change in price making the good more or less expensive relative to other goods that are substitutes 15. SUBSTITUTES: goods and services that can be used for the same purpose 16. SUPPLY CURVE: a curve that shows the relationship between the price of a product and the quantity of the product supplied Week III Chapter 3 17. SUPPLY SCHEDULE: a table that shows the relationship between the price of a product and the quantity of the product supplied 18. SURPLUS: a situation in which the quantity supplied is greater than the quantity demanded

×

×

### BOOM! Enjoy Your Free Notes!

×

Looks like you've already subscribed to StudySoup, you won't need to purchase another subscription to get this material. To access this material simply click 'View Full Document'

## Why people love StudySoup

Bentley McCaw University of Florida

#### "I was shooting for a perfect 4.0 GPA this semester. Having StudySoup as a study aid was critical to helping me achieve my goal...and I nailed it!"

Allison Fischer University of Alabama

#### "I signed up to be an Elite Notetaker with 2 of my sorority sisters this semester. We just posted our notes weekly and were each making over \$600 per month. I LOVE StudySoup!"

Bentley McCaw University of Florida

Forbes

#### "Their 'Elite Notetakers' are making over \$1,200/month in sales by creating high quality content that helps their classmates in a time of need."

Become an Elite Notetaker and start selling your notes online!
×

### Refund Policy

#### STUDYSOUP CANCELLATION POLICY

All subscriptions to StudySoup are paid in full at the time of subscribing. To change your credit card information or to cancel your subscription, go to "Edit Settings". All credit card information will be available there. If you should decide to cancel your subscription, it will continue to be valid until the next payment period, as all payments for the current period were made in advance. For special circumstances, please email support@studysoup.com

#### STUDYSOUP REFUND POLICY

StudySoup has more than 1 million course-specific study resources to help students study smarter. If you’re having trouble finding what you’re looking for, our customer support team can help you find what you need! Feel free to contact them here: support@studysoup.com

Recurring Subscriptions: If you have canceled your recurring subscription on the day of renewal and have not downloaded any documents, you may request a refund by submitting an email to support@studysoup.com