market
any place, physical or virtual, where the buyers and sellers of goods and services meet
demand
quantity of a good or service that a consumer or group of consumers are willing and able to purchase at a given price, during a particular time peroid
law of demand
as the price of a good increases, the quantity demanded of the good decreases
ceteris paribus
all other variables are held constant
non-price determinants of demand
- income
- tastes and preferences
- future price expectations
- price of related goods (substitutes / complements)
- number of consumers
normal goods
goods for which demand increases as income rises
inferior goods
goods for which demand decreases as income rises
substitute goods
- goods that one might easily use in place of another
- one for which demand will increases when the price of another good increases
complementary goods
- are typically used in combination with each other, are also purchased and consumed together
- demand for one decreases when the price of the other increases
movement along demand curve
caused by change in price
shift along demand curve
change in non-price determinants
supply
quantity of a good that producers are willing and able to produce at a given price over a particular time period, ceteris paribus
law of supply
- ceteris paribus, there is a direct relationship between a good’s price and the quantity supplied
- as price increases, more of a good is supplied by the firms
marginal cost
cost of producing an additional unit of output
non-price determinants of supply
- will cause the supply curve to shift outwards or inwards to reflect a change in the market at every price
- changes in cost of factors of production
- price of related goods
- indirect taxes and subsidies
- future price expectations
- changes in technology
- number of firms
joint supply
occurs when two or more goods are derived from the same product
price of related goods - supply
- firms can substitute the supply of goods from those earning lower prices to those getting better ones,
- cleary demonstrated by goods that offer joint supply
movement along the supply curve
when price changes, ceteris paribus
shifts of the supply curve
when any factor affecting supply other than price (non-price determinant) changes
equilibrium
state of rest, self-perpetuating in the absence of any outside disturbance
market equilibrium
the point where the quantity of a product demanded is equal to the quantity of a product supplied
equilibrium price
the price at which the quantity supplied and demanded are equal
