Micro Chapter 3 Exam 1

• its a model of how a competitive market works
• many buyers and sellers
• same good or service

• 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

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

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

• 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

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)

• 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

• "most goods"
• when a rise in income increases the demand for a 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

relationship between quantity demanded and price for an individual consumer

the horizontal sume of the individual demand curves of all consumers in that market

shows graphicallyy how much of a good or service people are willing to sell at any given price

is a change in the quantity supplied of a good at any given price

is a change in the quantity supplied of a good or service that is the result of a chnage in the good's price

• 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

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

relationship b/w quantity supplied and price for an individual producer

horizontal sum of the individual supply curves of all firms in that market

occurs at point E, where the supply curve and the demand curve intersect

• there is a surplus of a good when the quantity supplied exceed the quantity demanded
• occur whrn the price is above its equilbrium level

• There is a shortage of a good when the quantity demanded exceeds the quantity supplied.
• occur when the price is below equilibrium

leads to a movement along the supply curve due to a higher equilibrium price and higher equilibrium quantity

leads to a movement along the demand curve due to a higher equilibrium price and lower equilibrium quantity

• 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

• <--- Small decrease in supply ------------>Large increase in The increase in demand dominates the decrease in supply
• so quantity and price would increase