Week 2 - Theory Of Demand, Supply And Elasticity Flashcards
What is the definition of demand
It is the ability and willingness to buy specific quantities of goods in a given period of time at a particular price. Ceteris paribus
Classification of good and services
- Free good
- Public good
- Economy good
- Economy service
What does the law of supply state?
The higher the price of a good, the greater is the quantity supplied for that good and the lower the price of a good, is the quantity supplied ,ceteris paribus
Individual supply
The relationship between the quantity of a product supplied by a single seller and it’s price
Determinants of supply
- Price of limited good
- Cost of production
- Expectations about future price
- Technology advancement
- Number of sellers
- Government policies
- Improvement in infrastructure
Determinants of supply
- Price of limited good
- Cost of production
- Expectations about future price
- Technology advancement
- Number of sellers
- Government policies
- Improvement in infrastructure
Exceptional supply
Is the opposite of the law of supply where as price increases, the quantity of supply decreases
Joint supply
Increase in the supply of one good bring to increase in the supply of another related good
Individual demand
The relationship between the quantity of a good demanded by a single individual and its price
Market demand
The relationship between the total quantity of a good demanded by adding the quantities demanded by all consumers in the market and its price
Determinants of demand
- Advertisements
- Festive seasons and climate
- Level of
What does the law of demand state?
Law of demand states that the higher the price of a good, the lower is the quantity demanded for that good and the lower the price, the higher
is the quantity demanded, ceteris paribus.
What is the Determinants of demand - internal factor
Price of good
Meaning of substitute goods - demand
A change in the price of a
substitute product affects the demand for the product in the same direction. E.g.: tea vs coffee
Meaning of Complementary goods
The change in the price
of complementary product affects the demand for the product in the opposite direction. E.g.: pen vs ink
