the quantity of a good that a consumer plans to buy at a particular price during a specific time period.
OR as the book puts it The amount of a good that buyers are willing to purchase at a given price.
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Demand
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refers to the relationship between price and quantity demanded at every price when all other influences on consumers' buying references remain constant.
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Price Taker:
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Buyer/Seller who accepts the market price. No bargaining.
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A Demand curve is also
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the willingness to pay curve
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Equilibrium:
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A system in equilibrium will tend to stay in equilibrium, unless an exogenous force acts on the system. A system not in equilibrium, will move toward equilibrium.
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equilibrium price or market price
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is the price at which the quantity demanded equals the quantity
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equilibrium quantity or market quantity
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quantity bought and sold at the equilibrium price
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Holding all else equal
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All variables that can affect the demand for the good are held constant. [Implies that all the relevant variables are held constant. This allows us to focus on how the change in price affects the quantity demanded].
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Market demand is derived by
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-fixing the price- and adding up the quantities that each buyer demands. MARKET DEMAND THE PRICE IS FIXED
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Law of Supply/Demand
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S= As price goes up, qty supplied goes up.
D= As price goes up, qty demand goes down.
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Factors that change/effect suppy
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Changes in:
...Resources/Input Prices (factors of production)
...Prices of Other goods that the producers produces.
...Technology
...Expectations (sellers beliefs for the future)
...Changes in Number of producers (sellers)
ROTTEN
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What shifts the demand curve
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Changes in:
...price of a related (Other) good (substitute or compliment)
...Preferences or prices (tea vs coffee)
...Income
...Number of buyers)
...Expected future prices
OPINE
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Market price is determined by
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both supply and demand
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Other things remaining equal, the law of demand says that higher prices will lead to:
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a smaller quantity demanded and lower prices to a larger quantity demanded.
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Change in price
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Change in quantity Supplied/demanded
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In perfect competition
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Nobody can influence the price
Sellers produce identical goods
Free entry and exit
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What does it mean to say we are running out of "Cheap oil"?
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Oil reserves are becoming more expensive to find and extract over time.
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The invisible hand
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...efficiently allocates goods
and services to buyers and sellers
...leads to efficient
production within an industry.
...efficiently allocates
resources across industries.
...Prices direct the invisible hand.
...There are trade-offs between making the
economic pie as big as possible and
dividing the pieces equally.
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Equity
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Distribution of resources across and economy.
(Its in the domain of normative economics).
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