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Module 3 Notes

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36 views

Module 3 Notes

Uploaded by

reeyanpeekaboo69
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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MODULE 3 NOTES

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Ceteris Paribus - The assumption that all else other than price and quantity demanded or
supplied remains constant

Factors can change the demand or market supply curve, and shift it from left to right.

Normal good - An object when the consumer income increases, the demand for the
object increases
An object where the reverse occurs is called an inferior good.
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MR ZIRKLE VIDEOS
—--------------

DEMAND

Increase in demand shifts the graph towards the right, increases the willingness to pay at
higher prices for more items and the quantity demanded

Decrease in demand shifts the graph towards the left, decreases the willingness to pay at
higher prices for more items and the quantity demanded

Five factors can change the demand, income, population, taste, substitutes (when the
increase in price of one good leads to the increase in demand of another good) and
complements (two goods used together), and expectations for economical changes

A change in price of a product will NEVER change the demand curve

A change in quantity demanded is a result of ONLY PRICE, while a change in demand is a


shift in the curve

SUPPLY

Input prices - The costs incurred by businesses to secure resources necessary for
production
Subsidies - A benefit given to an individual or business by the government

Factors that can shift the supply curve all involve change in costs, which are
technological innovations, input prices, taxes and subsidies, expectations, entry or exit
in producers, changes in opportunity cost
EQUILIBRIUM

The changes in supply and demand can change the market equilibrium, causing price or
quantity to go higher or lower or indeterminate.

Choke Price - The lowest price at which the quantity demanded of a good is zero

Price ceiling - A legal maximum price


Price control - Government laws to regulate prices instead of letting market forces
regulate price
Price floor - A legal minimum price

Most economists agree that market forces are better than price control, and price control
can have drastic changes when outlawing the equilibrium, causing both buyers and
sellers to be worse off.

Deadweight loss - An economic inefficiency that occurs as a result of a policy within a


market that distorts the equilibrium.

Consumer surplus - The extra benefit consumers receive from buying a good and
service, measured by the price they were willing to pay minus what they actually paid

Producer surplus - Extra benefit producers receive from selling a good or service,
measured by price producer actually received minus what the producer would have been
willing to accept

Social surplus = Consumer surplus + Producer surplus

Consumer surplus is located in the area between the equilibrium price and the demand
curve on the left

Producer surplus is located in the area between the equilibrium price and supply curve
on the left

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