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Demand:
1. Models. Models based on economic theories are used to answer
questions about how some change, such as a tax increase, will affect
various sectors of the economy in the future. A good theory is simple to
use and makes clear, testable predictions that are not refuted (proven
wrong) by evidence. Most microeconomic models are based on maximizing
behavior. Economists use models to construct positive hypotheses
concerning how cause leads to an effect. These positive questions can
be tested. In contrast, normative statements, which are value judgments,
cannot be tested.
2. Positive vs Normative:
Positive: predictions that can be tested, descriptive statements. (objective
statement)
Normative: based on value judgments, opinions that cannot be tested nor
refuted wrong. (subjective statement)
3. Demand and Supply Model (SDM): The supply-and-demand model
describes how consumers and suppliers interact to determine the price and
the quantity of a good or service. To use the model, you need to determine
three things: buyers’ behavior, sellers’ behavior, and their interaction.
Even with its limitations, the supply-and-demand model is the most widely
used economic model. It provides a good description of how markets
function, and it works particularly well in markets that have many buyers
and sellers, such as most agricultural and labor markets. Like all good
theories, the supply-and-demand model can be tested—and possibly
proven false. But in markets where it is applicable, it allows us to make
accurate predictions easily.
Demand: The quantity of a good or service that consumers demand
depends on price
and other factors such as consumers’ incomes and the prices of related
goods.
Demand: 1
, Supply: The quantity of a good or service that firms supply depends on
price and other
factors such as the cost of inputs that firms use to produce the good or
service.
Market Equilibrium: The interaction between the consumers’ demand
curve and the
firms’ supply curve determines the market price and quantity of a good or
service that is
bought and sold.
Elasticities: Given estimates of summary statistics called elasticities,
economists can
forecast the effects of changes in taxes and other factors on market price
and quantity.
The quantity demanded is the amount of a good that consumers are willing
to buy at
a given price during a specified period
(such as a day or a year), holding constant the other factors that influence
purchases. The quantity demanded of a good or service
can exceed the quantity sold.
Factors that can influence consumer’s purchase decisions:
information (or misinformation) about the uses of a good.
the prices of other goods.
people’s incomes play a major role in determining what and how much
of a good or service they purchase.
government rules and regulations.
The Demand Function
demand equations
functions equations variables used note
demand Q = constant − quantity, price, to show the
function p(−, +)ps(−, +)y … other factors factors
(income, price impacting
the
Demand: 2
Demand:
1. Models. Models based on economic theories are used to answer
questions about how some change, such as a tax increase, will affect
various sectors of the economy in the future. A good theory is simple to
use and makes clear, testable predictions that are not refuted (proven
wrong) by evidence. Most microeconomic models are based on maximizing
behavior. Economists use models to construct positive hypotheses
concerning how cause leads to an effect. These positive questions can
be tested. In contrast, normative statements, which are value judgments,
cannot be tested.
2. Positive vs Normative:
Positive: predictions that can be tested, descriptive statements. (objective
statement)
Normative: based on value judgments, opinions that cannot be tested nor
refuted wrong. (subjective statement)
3. Demand and Supply Model (SDM): The supply-and-demand model
describes how consumers and suppliers interact to determine the price and
the quantity of a good or service. To use the model, you need to determine
three things: buyers’ behavior, sellers’ behavior, and their interaction.
Even with its limitations, the supply-and-demand model is the most widely
used economic model. It provides a good description of how markets
function, and it works particularly well in markets that have many buyers
and sellers, such as most agricultural and labor markets. Like all good
theories, the supply-and-demand model can be tested—and possibly
proven false. But in markets where it is applicable, it allows us to make
accurate predictions easily.
Demand: The quantity of a good or service that consumers demand
depends on price
and other factors such as consumers’ incomes and the prices of related
goods.
Demand: 1
, Supply: The quantity of a good or service that firms supply depends on
price and other
factors such as the cost of inputs that firms use to produce the good or
service.
Market Equilibrium: The interaction between the consumers’ demand
curve and the
firms’ supply curve determines the market price and quantity of a good or
service that is
bought and sold.
Elasticities: Given estimates of summary statistics called elasticities,
economists can
forecast the effects of changes in taxes and other factors on market price
and quantity.
The quantity demanded is the amount of a good that consumers are willing
to buy at
a given price during a specified period
(such as a day or a year), holding constant the other factors that influence
purchases. The quantity demanded of a good or service
can exceed the quantity sold.
Factors that can influence consumer’s purchase decisions:
information (or misinformation) about the uses of a good.
the prices of other goods.
people’s incomes play a major role in determining what and how much
of a good or service they purchase.
government rules and regulations.
The Demand Function
demand equations
functions equations variables used note
demand Q = constant − quantity, price, to show the
function p(−, +)ps(−, +)y … other factors factors
(income, price impacting
the
Demand: 2
