IB ECONOMICS Demand Microeconomics Markets Where buyers and
IB ECONOMICS Demand Microeconomics
Markets � Where buyers and sellers come together to carry out an economic transaction � Physical place � On-line � Product markets Goods and services are bought and sold � Factor markets Labor market- factors of production are bought and sold
Demand � Quantity of a good or service that consumers are willing and able to purchase at each given price in a given time period
The law of demand � As the price of a product falls, the quantity demanded of the product will usually increase, ceteris paribus. � All � other things being equal Demand curve that normally slopes downward � Movement along: P and Qd change
The law of demand � Increase in demand � Income effect: price falls and real income increases (amount that their incomes buy) � Substitution effect: price falls and is cheaper than the competition
The non-price determinants of demand � Income � Normal goods: income rises demand rises � Inferior goods: income rises demand falls � Price of other products � Substitutes: price changes = demand change for other products � Complements: change in price = change in demand � Unrelated goods: change in price no effect on demand � Tastes/preferences
The non-price determinants of demand � Other factors � Size of the population � Changes in the age structure of the population � Changes in income distribution � Government policy changes � Seasonal changes
Distinction of movement on the curve and shift in demand � A change in price of the good itself leads to a movement along the demand curve. � Price � change A change in any of the other determinants of demand will always lead to a shift of the demand curve to the left or right � Quantity change at each price
Linear demand functions (HL) � Demand function- equation � Qd= a-b. P � Qd-quantity demanded A- quantity demanded if price was zero P- price B- sets slope of the curve � � �
- Slides: 11