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Fundamentals of Demand in Economics Study Guide

This guide explores the fundamental concept of supply in economics. It covers the law of supply, the supply curve, and the distinction between supply and quantity supplied. It details the key determinants that shift the supply curve, including input prices, technology, number of sellers, and expectations. Understanding these factors is crucial for analyzing market behavior and price determination.

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Demand and Consumer Choice

Demand and Consumer Choice Fundamentals

Demand represents the quantity that buyers are willing and able to purchase at every possible price.

  • Demand
  • Law of demand
  • Market demand
  • Individual demand
  • Normal goods
  • Inferior goods
  • Complements
  • Substitutes
  • Movement along the demand curve
  • Shift in demand

Fundamentals of Supply and Market Competition

Fundamentals of Supply and Market Competition

An analysis of supply definitions, the law of supply, and the rational rule for sellers in competitive markets.

  • Supply
  • Law of supply
  • Ceteris paribus
  • Supply schedule
  • Supply curve
  • Perfectly competitive market
  • Price-takers
  • Rational Rule for Sellers
  • Marginal benefit
  • Marginal cost
  • Variable cost
  • Fixed cost
  • Diminishing marginal product

Markets and Market Equilibrium

Markets and Market Equilibrium

This topic covers definitions of demand, supply, and markets, including the law of demand, law of supply, and market equilibrium.

  • Demand
  • Supply
  • Law of demand
  • Law of supply
  • Market equilibrium
  • Equilibrium price
  • Equilibrium quantity
  • Excess supply
  • Surplus
  • Excess demand
  • Shortage
  • Invisible hand

Changes to the Market Equilibrium

An analysis of how demand or supply shifts impact market equilibrium.

  • Market equilibrium
  • Demand
  • Supply
  • Equilibrium change
  • Curve shifts

Understanding Price Elasticity of Demand

Fundamentals of Economic Elasticity

Elasticity is a measure of the responsiveness of quantity demanded or quantity supplied to one of its determinants such as price or income.

  • Elasticity
  • Price elasticity of demand
  • Percentage change in quantity demanded
  • Percentage change in price
  • Determinants of elasticity

Understanding Elasticity and Demand Types

This topic explores elastic vs inelastic demands through price and quantity changes.

  • Inelastic demand
  • Elastic demand
  • Perfectly inelastic demand
  • Perfectly elastic demand
  • Unitary elastic demand
  • Price and quantity relationship

Determinants of Price Elasticity of Demand

An analysis of the determinants of price elasticity of demand and issues with elasticity calculations.

  • Availability of substitutes
  • Necessities versus luxuries
  • Definition of the market
  • Consumers’ willingness to search
  • Time horizon
  • Percentage change in quantity

Price Elasticity of Demand and Revenue

This topic explores calculating price elasticity of demand using the midpoint method and predicting total revenue changes.

  • Midpoint method
  • Price elasticity of demand
  • Total revenue
  • Unitary elastic demand
  • Elastic demand
  • Inelastic demand

Demand Elasticity and Economic Relationships

This topic covers price elasticity on a linear demand, income elasticity of demand, and cross-price elasticity of demand.

  • Price elasticity on a linear demand
  • Income elasticity of demand
  • Normal goods
  • Inferior goods
  • Cross-price elasticity of demand
  • Substitutes
  • Complements

Market Supply vs Individual Supply

Price, Income, and Cross-Price Elasticities

Understanding Price Elasticity of Supply

Price elasticity of supply measures the percentage change in quantity supplied in response to a 1 percent change in price.

  • Price elasticity of supply
  • Inelastic supply
  • Elastic supply
  • Determinants of supply elasticity
  • Supply curve steepness

Government Policies in the Supply/Demand Model

Government Policies and Price Floors

Government policies in the supply/demand model include a price floor, which is a legal minimum on the price at which a good or service can be sold.

  • Price floor
  • Binding price floor
  • Non-binding price floor
  • Minimum wage
  • Minimum cigarette price laws
  • Minimum alcohol price

Factors Determining Supply and Curve Movements

Determinants and Dynamics of Supply

Factors determining the shape and position of the supply curve including prices of inputs, related outputs, technology, and number of sellers.

  • Supply curve
  • Quantity supplied
  • Movement along the supply curve
  • Shift of the supply curve
  • Prices of inputs
  • Substitutes and complements in production
  • Technology and productivity
  • Number of sellers
  • Expectations

Quantity Controls and Regulations

Government Policies in Supply and Demand

Quantity regulation involves legal minimum or maximum quantities that can be sold through mandates or quotas.

  • Quantity regulation
  • Mandate
  • Quota
  • Binding mandate
  • Binding quota
  • Equilibrium quantity

Tax Incidence and Government Policies

Government Policies and Tax Incidence

An analysis of how taxes affect market equilibrium, tax incidence, and the relationship between buyers and sellers.

  • Tax incidence
  • Market equilibrium
  • Tax on buyers
  • Tax on sellers
  • Supply and demand elasticities

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