Understanding Graphs Flashcards
Positive (direct) Relationship
When an INCREASE in on variable results in an INCREASE in the value of the other variable.
Negative (inverse) Relationship
INCREASE in one variable results in a DECREASE in the other variable
Dependent variables are denoted by the
Y axis
Nonprice Factors influencing Demand
T, I, F, N
- Taste and preferences
- Income
- Future Expectations of Price
- Number of Consumers
Normal (direct) Good is a good for which consumers have
A Greater demand as their income increases,
A Smaller demand as income decreases
Inferior (inverse) Good is a good for which consumers have
A Smaller demand as their income Increases
A Greater demand as their income Decreases
Substitute good
If an INCREASE in price of good Y causes consumers to INCREASE demand for good X and visa versa
Complimentary Good
If INCREASE in price of Good Y causes consumers to DECREASE demand for good X and visa versa
Qxd is Quantity demanded of good X
The function for determining Qxd =
f(Px, T, I ,Py, Pz, EXC, NC,…)
Px = Price of good X T = Tastes and preferences I = Income Py, Pz = Price of competitors goods EXC = Consumer expectation of future price NC = Number of consumers
Market Demand Function shows
the quantity demanded of the good or service by all consumers in the market at any given price
Market Demand function is influenced by these 4
- Prices of related goods
- Tastes and preferences
- Income
- Future Expectations
Non-price Factors Influencing Supply
S, I, P, F, N
- State of Technology (knowledge of combining inputs to lower costs)
- Input prices
- Prices of goods related in Production (increased demand in white mean means increased production of dark meat)
- Future Expectations
- Number of producers
Qxs is the supply function for a quantity supplied of good X and the function for determining Qxs is
f(Px, TX, P1, Pa, Pb, EXP, NP, …)
Px = Price of good X
Tx = State of Technology
P1 = Prices of inputs
Pa, Pb = Prices of goods A and B which are related in production of good X
EXP = producer expectations about future prices
NP = Number of producers
Individual supply function shows
the variables that influence an individuals producers supply of a product
Market supply function shows
The variables that influence the overall supply of a product by all producers (affected by number of producers in the market)