M3 Flashcards
desire, ability, and willingness to buy.
Demand
NON-PRICE DETERMINANTS OF DEMAND:
- Buyer’s Income
- Price of Substitutes
- Market Size
- Consumers Tastes
- Consumer Expectations
- Complement Goods
Ex. Minimum Wage Increases
Economic Recession
The Great Depression
Buyer’s Income
Goods and services can be used instead of other goods and services.
Price of Substitute Goods
Ex. Immigration
Detroit after collapse of auto industry
Market Size
Has strong effect on the demand.
Consumer Tastes
Expect prices to do in the future.
Consumer Expectations
Use of one product increases
Complement Goods
desire, ability, and willingness to offer products for sale.
Supply
NON-PRICE DETERMINANTS OF SUPPLY
- Number of Products
- Input Costs
- Labor Productivity
- Technology
- Government Action
- # of Sellers
- Producer Expectation
successful new products or service always brings out competitors.
Number of Products
collective price of resources that go into producing a good or services.
Input Costs
better trained or more skilled workers
Labor Productivity
scientific advances to the production process
Technology
such as taxes or subsidies
Government Action
amount of a product that producers are willing and able to supply.
Producer Expectation
price that “clears the market”.
Equilibrium Price
prices are relatively stable and the quantity of goods or services is equal.
Market Equilibrium
quantity supplied is greater than the quantity demanded.
Surplus
quantity demanded is greater than the quantity supplied.
Shortage
price cause changes in quantity demanded.
Demand Elasticity
large change in the quantity demanded.
Elastic Demand
smaller change in the quantity demanded.
Inelastic Demand
FACTORS THAT DETERMINE ELASTICITY OF DEMAND
- Substitutes
- Percentage of Income
- Necessity
- Duration
- Breadth of Definition
Minor price change is made.
Substitutes
Higher the percentage that the products price.
Percentage of Income
People will attempt to buy it no matter the price.
Necessity
Price change holds, the higher the elasticity.
Duration
The lower the elasticity.
Breadth of Definition
