...What is demand? In economics, the law of demand is an economic law, which states that consumers buy more of a good when its price is lower and less when its price is higher (ceteris paribus). When the price of a product is increased then less will be demanded. Also is the same for the opposite, when the price of a product is decreased then more will be demanded. The Law of demand states that the quantity demanded and the price of a commodity are inversely related, other things remaining constant. That is, if the income of the consumer, prices of the related goods, and preferences of the consumer remain unchanged, then the change in quantity of good demanded by the consumer will be negatively correlated to the change in the price of the good. Assumptions Every law will have limitations or exceptions. While expressing the law of demand, the assumption is that other conditions of demand are unchanged. If they don't remain constant, the inverse relation may not hold well. In other words, it is assumed that the income and tastes of consumers and the prices of other commodities are constant. This law operates when the commodity’s price changes and all other prices and conditions do not change. The main assumptions are: * Habits, tastes and fashions remain constant. * Money, income of the consumer does not change. * Prices of other goods remain constant. * The commodity in question has no substitute or is not in competition by other goods. * The commodity is...
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...Law of Demand In Economics, the law of demand is understood as when the price of a product or service increases, demand decreases; and when the price lowers, demand will increase (Comstock, 2015; McConnell, Brue, & Flynn, 2015). It is the customer’s who control demand, individuals make decisions regarding what to purchase with their money. Therefore, price changes are the only issue that will change the amount of demanded goods. For example, diamonds and air conditioners are conspicuous goods in which the law of demand does not apply; nor does it apply to potatoes and rice. Rice and potatoes are giffen goods; plus the law of demand does not apply to speculation or future price expectations. It is the consumer’s willingness to purchase products based on their income, preferences, advertisements and even taste. On the other hand, in Economics, the law of supply can be understood as prices rise the amount of supply will increase; and as prices decrease so does the supply (McConnell, et al, 2015; Supply and Demand, 2014). Price elasticity explains the amount of demand as it decreases when prices increase or the amount of demand as prices decrease (McConnell, et al, 2015; Montgomery, & Rossi, 1999). This concept, involves the laws of supply and demand by determining the amount of supply and demand based price and other factors (Comstock, 2015; McConnell, et al, 2015). Normally, elasticity equates to the relative changes of supply and demand according to price as it changes;...
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...What is demand? Demand is comprised of three things. Desire Ability to pay Willingness to pay It is not enough to merely want or desire an item. One must show the ability to pay and then the willingness to pay. If all three conditions are not me then the demand is not real. This, by the way, is the purpose of advertising. While many may want a product it is quite another to be willing to pay. Advertising attempts to move a consumer from mere want to action. These day even condition two may not stand in the way of a consumer. With the advent of credit cards we are able to purchase products without the current ability to pay. Many stores and car dealers even offer on the spot credit though the interest rate may be quite high. What factors alter your desire, willingness and ability to pay for products? Some factors include consumer income, consumer tastes the prices of related products like substitutes for that product of items that may complement that product. Marginal utility - extra satisfaction a consumer gets by purchasing one more unit of a product. Diminishing Marginal Utility: The more units one buys the less eager one is to buy more. Think of diminishing marginal utility this way. It is a hot summer day and your sweating bullets. You come across a lemonade stand and gulp down a glass. It tasted great so you want another. This second glass is marginal utility. But now you reach for a third glass. Suddenly your stomach is bloated and your feeling sick. That's...
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...News & Issues About.com US Economy US Economy How It Works Trends and Indicators Fixing It Share Print Free US Economy Newsletter! Discuss in my forum What Is the Law of Demand? The Law of Demand Explained Using Examples in the U.S. Economy By Kimberly Amadeo, About.com Guide See More About: demand gdp economic growth inflation recession "demand" (Credit: Bill Pugliano/Getty Images) Ads Less Spam, More StorageMail.Google.comGet over 7000MB of Free Email Storage with Gmail. sign up now! Roubini Global Economicswww.roubini.comGet The Latest Economic Insights From Nouriel Roubini & RGE Analysts Macroeconomics Text eBookwww.amazon.com/dp/1475962401Use instead of assigned text to wow prof. Easier to read and understand More US Economy Ads Recession Economy Economy Crisis US Economy Economy Travel The State of the Economy Ads Find A Foreign HusbandAfroIntroductions.com/MarriageChat With Men From USA, Europe & Canada. Browse Profiles & Join Free Free Check For Plagiarismwww.Grammarly.com/plagiarism_checkCheck Your Papers For Plagiarism And Correct Grammar Errors Now! The law of demand states that, all other things being equal, there will be less demand for higher priced goods and services. This definition makes sense -- you only have so much money to spend, and if the price of something goes up, you can afford less of it. However, the "all other things...
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...Law of demand: the principle that there is inverse relationship between the price of good or service and the quantity the buyers are willing to purchase in a defined time period, ceteris paribus. First what is the Difference between 1. Change in quantity demanded and changes in demand. 2. Change in quantity supplied and change in supply? 1. Change in quantity demanded: Changes in price occurs change in quantity demanded, along the curve. 2. Change in demand: Changes in non-price determinants occurs change in demand, it shift the curve. • None price determinants of demand: 1. Number of buyers, 2. Test and preferences, 3.income, 4. Expectation of buyers, 5. Price of related goods. 1. Change in quantity supplied: Changes in prices occurs change in quantity supply, along the curve. 2. Change in supply: changes in non-price determinants occurs change in supply, it will shift the supply curve. • None price determinants of supply: 1. Number of sellers, 2. Technology, 3. Input prices, 4. Taxes and subsidies, 5. Price expectations, 6. Price of other goods and services a. A severe frost destroys much of the Brazilian crop. In this situation the supply will decrease. The market will face the shortage, because there will not enough supply to fulfil the market demand. b. Coffee is shown to cause cancer in laboratory experiments on mice. Here the demand will decrease and will cause surplus in the market. c. The price of tea declines sharply in the next few months in production. It will...
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...What is Gross Domestic Products? Short Answer/Worksheet 1. What was Real GDP for 2009? The real GDP is based on four quarters 2. What does GDP tell us? is one the primary indicators used to gauge the health of a country's economy. It represents the total dollar value of all goods and services produced over a specific time period - you can think of it as the size of the economy. Usually, GDP is expressed as a comparison to the previous quarter or year. 3. How did GDP change from 2008? The decrease in real GDP in the fourth quarter primarily reflected negative contributions from exports, personal consumption expenditures, equipment and software, and residential fixed investment that were partly offset by a positive contribution from federal government spending. Imports, which are a subtraction in the calculation of GDP, decreased. 4. What caused these changes? 5. What was GNP for 2009? a. What is the difference between GDP and GNP? b. How did GNP change from 2008? Real gross national product -- the goods and services produced by the labor and property supplied by U.S. residents -- decreased 5.6 percent in the fourth quarter, compared with a decrease of 0.2 percent in the third. GNP includes, and GDP excludes, net receipts of income from the rest of the world, which increased $21.3 billion in the fourth quarter after increasing $9.9 billion in the third; in the fourth quarter, receipts decreased $77.2 billion, and payments decreased $98.5...
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...The Law of Supply and Demand ECO/365 The Law of Supply and Demand Understanding the laws of supply and demand are central to understanding how the capitalist economy operates. Since we rely on market forces instead of government forces to distribute goods and services, there must be some method for determining who gets the products that are produced. This is where supply and demand comes in. By themselves the laws of supply and demand give us back basic information, but when combined together are the key to distribution in the market economy which is price. The law of supply and demand is defined as the common sense principle that defines the generally observed relationship between demand, supply, and prices. As the demand increases the price goes up, which attracts new suppliers who increase the supply bringing the price back to normal. However, in the marketing of high price (prestige) goods, such as perfumes, jewelry, watches, cars, liquor a low price may be associated with low quality, and can reduce the demand. One function of markets is to find “equilibrium” which is prices that balance the supplies of and demands for goods and services. An equilibrium price which is also known as “market clearing” is one at which each producer can sell all he wants to produce and each consumer can buy all he demands. Naturally, producers always would like to charge higher prices, but even if they have no competitors, they are limited by the law of demand. If producers insist...
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...Microeconomics and the law of demand Eco/365 07/30/2015 Mark Wiese Microeconomics and the law of demand Understanding how the economy works is important for those who plan to be business majors. It is just as important for those planning on go into business for themselves or seeking management positions at a large company. In this writing there will be brief explanations on how the economy works related to it’s key concepts. Concepts such as microeconomic, macroeconomics, supply curve, and demand curve will be discussed. Even if the common person is not planning on going into business or holding a managing position having an understanding on how the economy works as a whole would aid them in their decision on the way their money is spent. Economics is the study of human and how people coordinate there wants and desires into a system. This is a system where goods and services can be purchased in accordance with government rules and regulations. It is said by Adam Smith, “that when individuals seek to operate a business that provides a service it helps the overall society”. This statement is a mixture of both microeconomics and macroeconomics (colander,2015). The whole economic system can be broken down into to groups that can be mastered equally. The name of theses to subordinate forms of economics is called microeconomics and macroeconomics. Often these two concepts are study separately as schools of thought but they both are dependent up on each other (Colander,...
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...Assignment 1 Explain the difference between the law of demand and the law of supply. What does the phrase ‘other things equal” mean? Why do we need that? Answer: The difference between the law of demand and the law of supply is that they both move into opposite direction. The law of demand states that the consumers will demand more of goods or services if the price goes down. The variable of the price drop creates an incentive to increase the demand for the goods and services. The law of supply moves in the opposite direction with its main focus being the suppliers of goods or services. There will be a larger incentive for the increase of goods supplied if the price increases. Both of these laws use the “other things equal” assumption or ceteris paribus. This assumption is used when identifying the relationship between two variables like a price and quantity. By using this assumption, economists can isolate the variables so other factors will not affect the development of the theory. When we see the term other things equal we know that this assumption is made to indicate that other variables are not changing or affecting the variables of interest. Without this assumption it would be impossible to develop theories about the relationships and make a causal connection between two variables that can be identified. 2 In your own words, explain the difference between a movement along the demand curve and a shift in demand. Then, provide an example from your own personal life...
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...1. The law of demand holds because it is based on common sense. The Law of Supply can be observed as demand comes from real people and exists in our day to day experiences, regardless of income or social status. 2. a. Change in quantity demanded refers to the amount of a good a person can buy as the price of the good changes. This is characterised by movements along the demand curve. Change in demand: when a factor other than price is responsible for an increase or decrease in the amount of a good that a person wishes to purchase. This is characterised by a shift in the demand curve. b. Normal Good is a product for which, ceteris paribus, an increase in income results in an increase in demand. Inferior Good is a product for which, ceteris paribus, an increase in income results in a decrease in demand. Substitute: refer to two goods, where an increase in the price of one good leads to an increase in the demand for the other. Compliment: refers to two goods, where an increase in the price of one leads to a decrease in the price of the other. An shift to the left of a demand curve can be seen when there is a decrease in demand, caused by Lower income, Complimentary goods, a decrease in population, Government policy such as taxation, seasonal factors and tastes. A shift to the right of a demand curve can be seen when there is an increase in demand, caused by higher income, Substitute goods, an increase in population, Seasonal factors, Consumer expectations and tatses. ...
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...Microeconomics and the Laws of Supply and Demand Name ECO 365/Microeconomics Date Professor Introduction The Supply and Demand simulation concept is essential to understand the effects of pricing and availability to consumers on real world commodities. This simulation captures the impact of different scenarios and situation of the property management firm, Goodlife Management in the city of Atlantis. Undergoing the scenarios, based on situations that occurred, these factors influences the equilibrium such as adjusting the rental rate of the apartments to maximize revenue, the attempt to increase the price to ensure sufficient number of apartments to be rented to satisfy the demands, and making modification to the firm’s trend from rental apartments to homeownership in order to meet the needs of the growing population due to Lintech Inc. Macroeconomics VS. Microeconomics In this simulation, the concepts of both study of Microeconomics and Macroeconomics are examined. Macroeconomics focuses on factors that affect the economy as a whole. In the scenario where Lintech company was introduced, the changes led to the whole economy of the city of Atlantis, not just the financial situation of Goodlife Management firm. The firm perceived the increase of residential demands due to the company workers that relocated in the area. However, in the scenario, when the firm increased the rental price due to the foreseen increased of demand of more apartments need to be rented...
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...Supplemental Unit 1. Demand, Supply, and Adjustments to Dynamic Change Note: The authors recommend that this feature be read along with Part I, Elements 6, 7, and 11 of Common Sense Economics. Common Sense Economics highlights how markets work and their impact on the allocation of resources. This feature will investigate this issue in more detail. It will use graphical analysis to analyze demand, supply, determination of the market price, and how markets adjust to dynamic change. Demand The law of demand states that there is a negative relationship between the price of a good and the quantity purchased. It is merely a reflection of the basic postulate of economics: when an action becomes more costly, fewer people will choose it. An increase in the price of a product will make it more costly for buyers to purchase it, and therefore less will be purchased at the higher price. The availability of substitutes—goods that perform similar functions—underlies the law of demand. No single good is absolutely essential; everything can be replaced with something else. A chicken sandwich can be substituted for a cheeseburger. Wheat, oats, and rice can be substituted for corn. Going to the movies, playing tennis, watching television, and going to a football game are substitute forms of entertainment. When the price of a good increases, people will turn to substitutes and cut back on their purchases of the more expensive good. This explains why there is a negative relationship...
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...A Porcupine named Fluffy When Mr. and Mrs. Porcupine had their first child, they were delighted. Now he needed a name. Should they call him Spike? No. Spike was too common. Should they call him Lance? No. Lance sounded too fierce. Should they call him Needleroozer? No Needleroozer was too… Long. Prickles? Pokey? Quillan? Then together they had an idea. Aha!! “Let’s call him Fluffy. It’s such a pretty name. Fluffy!” But soon there came a time when fluffy began to doubt that he was fluffy. He first became suspicious when he backed into a door and stuck fast. That was not a fluffy thing to do. He was more convinced when he accidentally slept on his back and poked holes in the mattress. A very unfluffy thing to do. When he tried to carry an umbrella he knew the truth without a doubt. Fluffy definitely wasn’t. So he decided to become fluffier. “Clouds are fluffy,” he thought. “I’ll be a cloud.” But he couldn’t stay up. “I know pillows are fluffy!” He said “I’ll be a pillow.” But when his mother sat on him, Ouch! Ouch! Ouch! she was not pleased. He tried soaking in a bubble bath for forty-five minutes, but he did not become fluffy he became soggy. He tried whipped cream. He put a little on each quill. It was not easy, and it took more than half a day. But this did not make Fluffy fluffy. “They should have named me Gooey,” he sighed. He ate a lot of fluffy marshmallows. He rolled in shaving cream and feathers. He even tried to become a bunny. But the truth remained Fluffy wasn’t...
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...Microeconomics and the Laws of Supply and Demand Eco 365 Instructed by: The purpose of this paper is to review and discuss how the principles of both macroeconomics and microeconomics are pertinent to many aspects of our daily lives in ways that a mass majority of individuals has never stopped to think about. The discussion herein is based on a simulation involving rental apartments in Atlantis that are all owned by the same company known as Goodlife. It is important to anyone individual or company in their growth to know when to know what a good price is, when to spend money, when to save money, and what to do in between, and to do so you must understand the concept of supply and demand and how to utilize the information. Most people understand the basic aspects of this; however, to be effective one must know the importance of how both macro and microeconomics are to our ways of living. Further at it relates to the simulation, discussions in this paper will consist of identifying both a supply and demand curve and explain what happens when a shift takes place as well as their different areas of impact. Lastly, I will discuss price elasticity and how a persons spending. Macro and Microeconomic Principles Here is a quick review of two important terms and definitions. Pursuant to Colander (2013), “Macroeconomics is the study of the economy as a while” and “Microeconomics is the study of how individual choices are influenced by economic forces”...
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...the Laws of Supply and Demand In this paper we will be discussing the law of supply and demand. First of all, what is demand curve? Demand curve is the graphical representation of demand that shows the quantities consumers are able and willing to buy at various prices. A normal demand curve is downward sloping in accordance with the law of demand. Supply curve is also a graphical representation of supply that shows the quantities producers are able and willing to sell at various prices. A normal supply curve is upward sloping in accordance with the law of supply. Equilibrium is a state of balance where dynamic forces have canceled each other out and there is no tendency for change. The laws of supply and demand are the ones that determine our economy today. During the simulation it showed that the numbers affect dramatically towards the economy. “ For example, if the demand curve shifted to the left, it would show a decrease in demand from consumers and cause fewer apartments to be filled.” (Supply and demand Simulation, Linda R, July 21,2014) In this situation what happened is that due to a widespread desire of having property ownership and been forced from the management company to lower their prices for them to compensate. Equilibrium price becomes lower because the demand decreased, while the supply and the quantity remained the same. “If the supply curve were to shift to the right, it would indicate an increase in available apartments rent.” (Supply and demand Simulation...
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