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Demand. Desire, ability and willingness to buy a product. Demand Schedule. List that shows the quantity demanded at all prices that prevail in the market at any given time. Demand Curve. Graphic representation of demand schedule. Law of Demand. Relationship of demand and price

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Presentation Transcript
demand
Demand
  • Desire, ability and willingness to buy a product
demand schedule
Demand Schedule
  • List that shows the quantity demanded at all prices that prevail in the market at any given time
demand curve
Demand Curve
  • Graphic representation of demand schedule
law of demand
Law of Demand
  • Relationship of demand and price
  • Varies inversely
changes in demand
Changes in Demand
  • Tastes
  • Price of related good
  • Expectation of future prices
  • Number of buyers in the market
demand elasticity
Demand Elasticity
  • Indicates the extent to which changes in price cause changes in quantity demanded.
elastic vs inelastic
Small change in price causes a relatively large change in the quantity of demand.

Change in price causes a relatively smaller change in quantity demanded.

Elastic vs. Inelastic
determinants of demand elasticity
Determinants of Demand Elasticity
  • Can the purchase be delayed?
  • Are adequate substitutes available?
  • Does the purchase use a large portion of income?
supply
Supply
  • A schedule of quantities that people will sell at different prices
supply schedule
Supply Schedule
  • The quantity offer at each and every possible market price
supply curve
Supply Curve
  • Graphic representation of supply schedule
law of supply
Law of Supply
  • The quantity supplied, or offered for sale, varies directly with its price
changes in supply
Changes in Supply
  • Change in supply of inputs
  • Productivity of workers
  • Technology
  • Number of sellers
  • Taxes, fees, subsidies
  • Expectations
  • Government regulation
equilibrium
Equilibrium
  • Supply equals demand
  • No shortage
  • No surplus
aggregate demand
Aggregate Demand
  • The total value of real GDP that all sectors of the economy are willing to purchase at various price levels
aggregate demand1
Aggregate Demand
  • Real Balance Effect
    • Buy more as price declines
  • Interest Rate Effect
    • Rise or fall in rates
  • Foreign Purchase Effect
    • Effect on net exports
aggregate supply
Aggregate Supply
  • The amount of real output or real GDP, that will be made available by sellers at various price levels.
long run aggregate supply curve
Long-Run Aggregate Supply Curve
  • Full Employment 5%
  • Output is independent of prices
short run aggregate supply curve
Short-Run Aggregate Supply Curve
  • Economy operates below full employment GDP in short run
  • Shape- Business firms will supply increasing amounts of output as prices rise.
  • Can operate beyond full employment GDP in short run
say s law
Say’s Law
  • Jean Baptiste Say
  • Supply creates its own demand
keynes
Keynes
  • Below full employment
  • Full employment
  • Above full employment
disequilibrium
Disequilibrium
  • Aggregate demand exceeds aggregate supply
    • Inventories decline
    • Business order more inventory
    • Increase land, labor, capital
disequilibrium1
Disequilibrium
  • Aggregate supply exceeds aggregate demand
    • Inventories rise
    • Retailers order less from manufacturers
    • Manufacturers produce less
keynesian fix for disequalibrium
Keynesian Fix for Disequalibrium
  • I volatile
  • G steps in and spends money
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