Supply & Demand Chapters 3, 4, & 5

Chapter 3 Demand – True demand meets 2 requirements: 1 2 Law of Demand Demand Curve: Demand Schedule: Diminishing Marginal Utility

Demand Shift: Shift to the left: Shift to the right:

Factors that will change demand of products/services Consumer tastes and preferences Market size for a good—increased market size will increase demand Income effect: Prices of related goods: – Substitution Effect – Complementary Effect Consumer expectations:

Elastic demand: Inelastic demand: Total Revenue: – Price of good x QD=TR

Chapter 4 Supply: – Two requirements: Law of Supply: Profit Motive: Nash Equilibrium:

Break-even Point: – Fixed costs: – Variable costs:

Law of Diminishing Marginal Returns: – Increasing Returns: – Diminishing Returns: – Negative Returns: Bottleneck Effect: – Marginal Analysis: – TP: – MP: – Productivity:

Factors that Cause Supply to Shift Producer Expectations: Costs of resources: Improved technology: Costs of related goods/products: Government actions: – Laws/regulations: – Subsidies: – Taxes:

Combining Supply & Demand Market Equilibrium: Price floor: Price ceiling: Surplus: Shortage: – Rationing: – Consequences of rationing: