Microeconomics (Nicholson) 2022-2 Flashcards
1
Q
What is the market demand (X or Q_D) for good x equal to?
A
The summation of all the individual market demands as functions of all related variables.
2
Q
What two insights are key about the market demand (X or Q_D) for x?
A
- Everyone faces the same prices for both goods. That is why px and py enter the equation without person-specific subscripts (i).
- On the other hand, each person’s income enters his or her own specific demand function. Market demand depends not only on the total income of all market participants but also on how that income is distributed among consumers.
3
Q
Why do changes in determinants of demand (X) different from the price of x shift the curve?
A
The curve is a two-dimensional representation of a many-variable function. Changes in p_x result in movements along this curve, but changes in any of the other determinants of the demand for X cause the curve to shift to a new position.
