Micro Chapter 3 Exam 1

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Anonymous
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131224
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Micro Chapter 3 Exam 1
Updated:
2012-01-28 17:06:47
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Supply Demand Model
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Demand curve/supply curve/market equilibrium
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  1. Supply and demand Model
    • its a model of how a competitive market works
    • many buyers and sellers
    • same good or service
  2. Demand curve
    • A demand curve is the graphical representation of the demand schedule; it shows how much of a good or service consumers want to buy at any given price
  3. Shift of the demand curve
    is a change in the quantity demanded at any given price, represented by the change of the orginal demand curve to a new position, denoted by a new demand curve
  4. Movement alog the demand curve
    A movement along the demand curve is a change in the quantity demanded of a good that is the result f a change in that good's price
  5. Factors Shifting Demand Curve
    • Changes in the prices of related goods
    • Subsitutes Ex: coke vs. pepsi
    • Complements: tennis court rental and tennis ball
    • Changes in income
    • Normal goods
    • Inferior goods
    • Chnages in tastes
    • Changes in expectations
  6. Subsitutes
    if a rise in the price of one good (coffee) makes consumers more willing to buy the other good (tea) which increases the demand for the other good (tea)
  7. Complements
    • are usually goods that in some sense are consumed together
    • a change in the price of one of the goods will affect the demand for its complement
    • a rise in the price of one good leads to a decrease in the demand for the other good
  8. Changes in income
    Normal good
    • "most goods"
    • when a rise in income increases the demand for a good
  9. inferior good
    • is one that is considered less desirable than more expensive alternatives
    • a rise in income decreases the demand for good, demand curve shifts to the left
  10. individual demand curve
    relationship between quantity demanded and price for an individual consumer
  11. market demand curve
    the horizontal sume of the individual demand curves of all consumers in that market
  12. Supply Curve
    shows graphicallyy how much of a good or service people are willing to sell at any given price
  13. a shift of the supply curve
    is a change in the quantity supplied of a good at any given price
  14. Movement along the supply curve...
    is a change in the quantity supplied of a good or service that is the result of a chnage in the good's price
  15. Factors Shifting Supply Curve
    • Changes in input prices
    • ex: if labor cost increases, less number of firms will be able to procude/sell and make positive profits _> more firms exit markets -> aggregate supply decreases
    • Changes in the prices of related g/s
    • subsitutes
    • complements
    • Changes in technology
    • better technology, reduces the cost of production, more can be produced
    • Changes in Expectations
    • price expectations can determine the choice about when they put their good up for sale
    • Changes in the number of producers
  16. Input prices
    a good or service that is used to produce another good or service...change in price will affect the production cost of the final good
  17. Individual supply curve
    relationship b/w quantity supplied and price for an individual producer
  18. market supply curve
    horizontal sum of the individual supply curves of all firms in that market
  19. Market equilibrium
    occurs at point E, where the supply curve and the demand curve intersect
  20. Surplus (=Excess Supply)
    • there is a surplus of a good when the quantity supplied exceed the quantity demanded
    • occur whrn the price is above its equilbrium level
  21. Shortage (Excess Demand)
    • There is a shortage of a good when the quantity demanded exceeds the quantity supplied.
    • occur when the price is below equilibrium
  22. Equilbrium and Shits of the Demand Curve
    an increase in demand
    leads to a movement along the supply curve due to a higher equilibrium price and higher equilibrium quantity
  23. Equilibrium and Shifts of the Supply Curve
    A decrease in supply
    leads to a movement along the demand curve due to a higher equilibrium price and lower equilibrium quantity
  24. Technology Shifts of the Supply curve
    Increase in supply
    • leads to a movement along the demand curve to a loqer equilibrium price and higher quilibrium quantity
    • Technology in 1970s: personal computers, more efficiient automobiles, space exploration, microwave oven, cassette tapes in 1990s: computers, internet
  25. Simoltaneous Shifts of Supply and Demand
    • <--- Small decrease in supply ------------>Large increase in The increase in demand dominates the decrease in supply
    • so quantity and price would increase
  26. Simultaneous Shifts of Supply and Demand chart

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