General Economics
What determines the slope of the demand curve? & What makes the slope more vertical or
horizontal? : The Price elasticity of demand, How price sensitive are my customers
The relationship between demand and price
- the income effect
- the substitution effect
- The demand curve
- assumptions
- the axes
- illustrates how much would be demanded at each price
Other determinants of demand
- Tastes (Technology, trends, fashion)
- number and price of substitute goods
- number and price of complementary goods
- income
- distribution of income
- expectations
(Movements along and shifts in the demand curve)
(Other way around for a decrease in demand)
, Relationship between supply and price
- as price rises, firms supply more
- it is worth incurring the extra unit costs
- they switch from less profitable goods
- in the long run, new firms will be encouraged to enter the market
- The supply curve
- assumptions
- the axes
- illustrates how much would be supplied at each price
Other determinants of supply
- costs of production
- profitability of alternative products
- profitability of goods in joint supply
- nature and other random shocks
- aims of producers
- expectations of producers
(Movements along and shifts in the supply curve)
(Other way around for a decrease in supply)
What determines the slope of the demand curve? & What makes the slope more vertical or
horizontal? : The Price elasticity of demand, How price sensitive are my customers
The relationship between demand and price
- the income effect
- the substitution effect
- The demand curve
- assumptions
- the axes
- illustrates how much would be demanded at each price
Other determinants of demand
- Tastes (Technology, trends, fashion)
- number and price of substitute goods
- number and price of complementary goods
- income
- distribution of income
- expectations
(Movements along and shifts in the demand curve)
(Other way around for a decrease in demand)
, Relationship between supply and price
- as price rises, firms supply more
- it is worth incurring the extra unit costs
- they switch from less profitable goods
- in the long run, new firms will be encouraged to enter the market
- The supply curve
- assumptions
- the axes
- illustrates how much would be supplied at each price
Other determinants of supply
- costs of production
- profitability of alternative products
- profitability of goods in joint supply
- nature and other random shocks
- aims of producers
- expectations of producers
(Movements along and shifts in the supply curve)
(Other way around for a decrease in supply)
