Supply and demand model is a model of how a competitive a market works • Five keys elements:
• The demand curve
• Supply curve
• The set of factors that cause the demand curve to shift and the set of factors hat cause the supply curve to shift o The market equilibrium, which includes the equilibrium price and equilibrium quantity o The way the market equilibrium changes when the supply curve or demand curve shifts Demand schedule ( demand curve
The Demand Schedule and the Demand Curve
Demand schedule – a table showing how much of a good or service consumers will be willing and able to buy at different prices.
Quantity demanded is the actual amount of a G%S consumers are willing able to buy at some specific price Demand curve – is a graphical representation of the demand schedule. It shows the relationship between quantity demanded and price.
Law of demand – says the higher price for a good or service, all other things being equal, leads people to demand a smaller quantity of that good or service.
Shift of the Demand Curve
Answer lies in crucial phrase – “all other things being equal”
Change in demand – is a shift of the demand curve, which changes the quantity demanded at any given price Movement along the demand curve – is a change in the quantity demanded of a good that is the result of a change in that good’s price.
Five principal factors that shift the demand curve for a G & S: • Change in the prices of related goods or services
• Changes in income...