Chapter 2
Demand
Supply
The quantity of product that consumers are willing and able to purchase at different prices, in a period of time.
Quantity of a product that suppliers are willing and able to sell at different prices in a period of time
Notional Demand
Effective demand
Demand that is not always backed up with ability to purchase
Demand that is supported by the ability to pay
Demand curve
Shows overall market for a product at different prices in a period of time
Factors influencing demand
Demand Schedule
Inverse relationship with price
Income
Normal goods
Price and substitutes
Positive relationship between income and aggregate demand
Inferior goods
Negative relationship, cheap product when income falls
Complement goods
joint demand
effect on one can effect both goods
Trends, fashion, taste and attitudes
Supply curve
Direct relationship with price
Price changes cause changes in quantity supplied
Factors influencing Supply
Costs
Size and nature of industry
Bigger and growing industry supply more
Supply could be restricted to maintain prices
Change in prices of other products
Competitors lowers, firm also lowers prices to maintain competition
Government policies
taxes, subsidies, quotas
External conditions. Shortage, harvest shortages, weather