Summary - Theme 1 notes

, thema ama




Demand :




The
·


of good/service and
quantity a c o n s u m e rs are
willing

able to buy at time period .
a
given price in a
given




Law of Demand : As price increases , demand decreases. Price


decrease , price increases.




P Ceterius Paribus : a

prices
up
go .

requal .




P2 contraction of demand factors a re
unchanged .
M




a
T




↳ new down
Q2 = Q1 - Qb Q




?
Why the downwards slope


i) income effect :
you
can't afford it



ii) substitution effect :
price goes up , you find
something
cheaper .
Love vs peps .




P ·
other factors than can affect


demand other than price :



P
.
------------




r
i D3 Du
D2
Population
Q31- Q1 - Q2 Q

Advertising
income ↑ demand Substitutes Prices
↑
normal
goods : cars, brands, J Income

clothes ,
fine dining etc . Fashion/Taste

inferior goods : fast food , public transets. Interest Rates

↳ income t demandt Compolementary Price

, Supply :




·

The quantity of a good/service producers are and able
willing
to produce at price given time period .
given
a in a




Law of Supply : Price increases , supply increases. Vice versa .




P
5
P2 ... -... --




I
--




extension of supaa
↑ 4-
Pl


py
↓
.........
......
Q35Q1 -
> Q




Why ?
·
due to profit motive


factors that can effect supply

P 43
5 other than price :


S2
P .................
, -




· ! I
-



-
Productivity
Indirect Tax
Q3FQ1 - Q2
No of Firms
S .




=
barrier of entry Technology
more firms S. -
> 32 Subsidy
less firms 3153 Weather ret Transport

Production
Labour

C ost of
-
-
0. 1



Raw/utility regulations
↳
Materials

If any of these increase :




5 >
-

33 . If they decease :




S1 - 32