market demand
market demand curve is more elastic than individual one
Comparative statics
(1) Prices of the good itself
(2) Other stuff
Difference between quantity demanded and demand
The change in price of the good itself will not shift the demand curve; instead, it just changes the quantity demanded of buyers.
Other stuff can shift the demand curve and change the demand of customers.
Other stuff:
(1) income
Normal goods: when income increases, we buy more, demand curve shifts out/increase
Inferior goods: when income increases, we buy less, demand curve shifts in/decrease
Normal and inferior good are subjective
(2) price of related goods
Substitutes: two goods for which an increase in the price of one leads to the increase of demand in the other one.
Complements: two goods for which an increase in the price of one leads to the decrease of demand in the other one
Substitutes and complements goods are subjective
(3) expectation
Your expectation of your future income will impact the behavior now.
For example, if you think that your future income will rise, you will save less today and consume more.
Your expectation of the price of goods will impact the behavior.
For instance, if you think that in the future the price of gas will decrease, you will buy less.
The answer to a paradox: After a disaster, prices of goods rise but people buy more.
Answer: People's expectation of the prices of these goods is that they will rise in the future, so today they buy more.
(4) preferences
Your taste may change, and your behavior may change.
(5) the number of buyers
Because market demand is derived from individual demands, it depends on all those factors that determine the demand of individual buyers, including buyers' incomes, tastes, expectations, and the prices of related goods.
Elasticity: a measure of the responsiveness of quantity demanded or quantity supplied to one of its determinants.
In other words, it is a measure of how we behave to the change of price: if we are sensitive to the price, elastic; and vice versa.
Price elasticity of demand: a measure of how much the quantity demand if a good responds to a change in the price of that good.
How to compute: percentage change in quantity demanded/percentage change in price
What's the meaning of the outcome:
If the outcome is 2, for example, it means that the change in the quantity demanded is proportionately twice as large as the change in the price.
(4) preferences
(5) numbers of participants
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