Question

SUPPLY AND DEMAND

A. Definition of a market

B. Components of a market

C. DEMAND

1) Definition of demand

2) Law of demand

3) INVERSE RELATIONSHIP BETWEEN PRICE AND QUANTITY DEMANDED

4) REASON THE DEMAND CURVE SLOPES DOWNWARD TO THE RIGHT

5) MOVEMENT ALONG THE CURVE

6) SHIFTS IN THE CURVE

7) SUBSTITUTES

8) COMPLEMENTS

Answer 1

A. Market in economics is not the physical market pace but rather the arrangement of buyers and sellers which is involved in exchanging goods and services in return for money.

B. Components of Market :

· Buyers

· Sellers

· Goods/Service

· Money

· Government

C. Demand

Definition : It is the quantity of good or service a consumer is willing to purchase at different prices at a given period of time.

Law of Demand : The law states, with an increase in price of a good/service, the consumer will be less willing to purchase it.

Hence, there is an inverse relationship between quantity demanded and price.

This is also the reason the demand curve is downward sloping. With every unit increase in price, consumers will buy less goods/services.

Movements Along the Curve are due to changes in prices. With different prices, quantity demanded changes at a given time.

The shift in demand curve is due to factors affecting demand other than price. These factors can be income of consumers, price of substitutes, price of complements, taste and preferences, etc.

Substitutes are the products which can be used interchangeably with the given product. The consumer gets the same utility using those products. The product’s demand is inversely proportional to the demand of its substitute.

Complements on the other hand are the product which are used in addition or along with the given product. The use of a product with its complement enhances consumer utility. . The product’s demand is directly proportional to the demand of its complement.