Unit I ( Demand and Supply)

Demand:  quantities that people are willing and able to buy at various prices

• The Law of Demand:  there is an inverse relationship between price and quantity demanded

• What causes a "change" in quantity demand ?"    - change in price

• What causes a "change in demand?" 

1. change in buyer's taste
2. change in number of buyers
3. change in income
4. change in price of related goods
5. change in expectations (future) 

Change in income:

1.  

   -Inferior goods: increase in income causes a fall in demand 

   -Normal goods: increase in income causes an increase in demand  

   Change in price of related goods: 
   
   

   -Complementary goods: goods that go together 

   -Substitute goods: goods that take place of another  

   Supply:  quantities that producers or sellers are willing and abe to produce at various prices 
   
   
   
   
   
   • The Law of Supply:  direct relationship between price and quantity  

1. • What causes a change in quantity supplied?  - change in price 

1. 1. change in weather
   2. change in technology 
   3. change in cost of production
   4. change in number of sellers
   5. change in taxes on subsidies 
   6. change in expectations