Chapter 3 Individual Markets Supply and Demand

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Chapter 3Individual MarketsSupply and Demand

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Chapter 2 Table 2.1
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Chapter 2 Figure 2.1
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Chapter 2 Figure 2.3
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Chapter 2 Table 2.2
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Chapter 2 Figure 2.4
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Chapter 2 Figure 2.5(a)
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Chapter 2 Figure 2.5(b)
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Chapter 3 Table 3.1
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Chapter 3 Figure 3.1
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The Law of DemandWhy is the Demand Curve
Downward-sloping?

• The Income Effect
• as the price rises given your income
• you can only afford to buy less
• as the price falls given your income
• you can afford to buy more
• The Substitution Effect
• As the price rises, buyers switch to relatively
  cheaper goods
• As the price falls, buyers switch away from
  other, relatively more expensive goods

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Chapter 3 Table 3.2
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Chapter 3 Figure 3.2
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Determinants of Demand (5)

• Tastes Preferences
• Consumer Income
• Normal v. Inferior Goods
• Number of Consumers
• Consumer Expectations (of future price changes or
  availability)
• Prices of Related Goods Services
• Substitutes
• Complements
• Mnemonic TINER

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Chapter 3 Figure 3.3
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Chapter 3 Table 3.3
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Chapter 3 Table 3.4
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Chapter 3 Table 3.5
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Chapter 3 Figure 3.4
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The Law of SupplyWhy is the Supply Curve
Upward-sloping?

• Marginal costs of production rise as more is
  produced
• When producers make more output, they need more
  inputs
• Land
• Labor
• Capital
• Entrepreneurship
• Producers bid up the price of these inputs by
  using more
• and must pass on the higher cost to consumers

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Chapter 3 Table 3.6
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Determinants of Supply (6)

• Production Technology
• Input Prices (Factor or Resource Prices)
• Number of Suppliers
• Taxes and/or Subsidies
• Producer Expectations
• Prices of Related Goods Services
• Substitutes in Production/Switching Outputs
• Complements in Production/Byproducts
• Mnemonic TINTER

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Chapter 3 Table 3.7
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Chapter 3 Table 3.8
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Chapter 3 Figure 3.5
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Chapter 3 Figure 3.6
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Chapter 3 Table 3.9
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A Price Ceiling
Chapter 3 Figure 3.7
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A Price Floor
Chapter 3 Figure 3.8
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Supply and Demand DeterminantsRelationships

• Determinants of Demand
• Tastes and Preferences
• Income
• Number of Consumers
• Consumer Expectations
• Prices of Related Goods and Services

• Determinants of Supply
• Technology
• Input Costs
• Number of Producers
• Producer Expectations
• Prices of Related Goods and Services
• Taxes Subsidies