Today we talked about what affects market demand.
Comparative statics are what things impact the amount of a good we buy.
To move up and down the demand curve: price changes. (change
quantity demand).
To move the demand curve (shift whole demand curve left or
right):
Changes in
income – more income doesn’t mean you consume more.
Price of
other things change
Expectations
change – what the future predicts about demand impacts us today
Tastes
change – preferences change
Number of
participants
Normal goods – income increases = quantity demand
increases
Inferior goods – income increases = quantity demand
decreases
Substitute goods – price of good X increases – demand
for good Y increases
Compliment goods – price of good X increases – price for
good Y increases
Quantity demand is defined as how much of a good we
consume as a function of our ability/willinness to buy it.
Elasticity:
When the law of demand seems to not apply.
Elastic - consumption is VERY responsive to change in
price
Inelastic - consumption is NOT that responsive to
change in price
We measure this using Own Price Elasticity of Demand:
m=%change in quantity demanded / %change in price.
If m =2, and price increases by 10% then you consume 20%
less.
No comments:
Post a Comment