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1 demand supply_analysis

by on Mar 27, 2011

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Demand Supply analysis...Explanations for Law of Demand Degree of scarcity of one good relative to another helps determine each good’s relative price Definition of demand includes the “other ...

Demand Supply analysis...Explanations for Law of Demand Degree of scarcity of one good relative to another helps determine each good’s relative price Definition of demand includes the “other things constant” assumption Among the “other things” are the prices of other goods Substitution Effect When the price of a good falls, its relative price makes consumers more willing to purchase this good When the price of a good increases, its relative price makes consumers less willing to purchase this good Changes in the relative prices – the price of one good compared to the prices of other goods – causes the substitution effect…you substitute toward the less expensive good.

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1 demand supply_analysis 1 demand supply_analysis Presentation Transcript