Summary
Summary chapter 2-demand and supply
- Course
- Managerial Economics
- Institution
- Azad University
Summary Managerial Economics & Business Strategy, ISBN: 0619 Managerial Economics- chapter 2- demand and supply
[Show more]
Connected book
Book Title:
Author(s):
- Edition:
- ISBN:
- Edition:
Seller
Follow
Content preview
Chapter 2: Demand and SupplyLaw of demand – As purchasing price increases (decreases) the quantity a consumer is willing
to purchase decreases (increases). It is assumed that all other things remain constant.
Market demand curve – A curve (negative slope) indicating the total quantity of a good all
consumers are willing and able to purchase at each possible price, holding the prices of related
goods, income, advertising, and other variables constant.
Demand Shifters
Change in quantity demanded – Changes in the price of a good lead to a change in the quantity
demanded of that good. This corresponds to a movement along a given demand curve.
Change in demand – Changes in variables other than the price of a good, such as income or the
price of another good, lead to a change in demand. This corresponds to a shift of the entire
demand curve.
Shift to the right gives an increase in demand.
Shift to the left gives a decrease in demand.
Demand shifters – Variables other than the price of a good that influence demand (demand
curve moves to the right or to the left).
Income
Normal good – A good for which an increase (decrease) in income leads to an increase
(decrease) in the demand for that good.
Inferior good – A good for which an increase (decrease) in income leads to a decrease (increase)
in the demand for that good.
Prices of related goods
Substitutes – Goods for which an increase (decrease) in the price of one good leads to an increase
(decrease) in the demand for the other good.
Complements – Goods for which an increase (decrease) in the price of one good leads to a
decrease (increase) in the demand for the other good.
, Advertising and consumer tastes
An increase in advertising makes the demand curve shift to the right.
Informative advertising has two possible effects:
Consumers buy the same quantity for a higher price.
Consumers buy a larger quantity for the same price.
Persuasive advertising can influence demand by altering the underlying taste of consumers.
Population
If the overall size of the population increases (decreases), the demand curve shifts to the right
(left). The composition of a population can also affect the demand for a product.
Consumer expectations
If the price of a product is expected to rise in the near future, people will substitute current
purchases for future purchases (called stockpiling). The demand curve shifts to the right.
Other Factors – Any variable that affects the ability or willingness to buy a good or
service is a potential demand shifter.
Demand function – A function that describes how much of a good will be purchased at
alternative prices of that good and related goods, alternative income levels and alternative values
of other variables affecting demand.
Linear demand function – A representation of the demand function in which the demand for a
given good is a linear function of prices, income levels, and other variable influencing demand.
Law of demand
Complement
Substitute
Inferior good
Normal good
Consumer surplus – The value consumers get from a good but do not have to pay for. This is
the area above the price paid for a good, but below the demand curve.
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller alikarimi. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for CA$9.48. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
72349 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now