Summary Economics Theme 7: 7A, 7B & 7C
7.A. Market demand
Concrete and abstract markets
Abstract market = All the price, demand & supply factors that make up a market (e.g. the housing
market)
Concrete market = Physical place (or online) where buyers and sellers meet to trade goods (e.g. a flower
auction, marktplaats.com)
Factors of demand
- Five factors determine the total demand for a good or service:
1. Price of product or service
2. Number of demanders
3. Income of demanders
4. Price of related goods
5. Quality of and preference for the product or service
- The price of a good and its demand are normally negatively related to each other. When the
price is high demand is low. When price is low demand is high.
- The more people there are and the higher their income, the higher the demand will be.
- When restaurants will become more expensive, less people will go out and the demand for
babysitters will decrease.
- When you buy a house you will need to get a
mortgage loan with the bank.
- The houses in the social sector of the rental market
often has lower prices and are limited. But only
people with an income lower than €3670 per month
can apply for it.
Demand equation
Demand equation = Equation that shows the amount of goods that consumers are willing to buy at each
market price, assuming all other circumstances remain equal.
- The price is negatively related to the demand.
- Demand equations can ‘handle’ price changes but not other changes. So all other circumstances
have to remain equal.
, Demand curves
- In economics, the price is placed on the y-axis and the demand on the x-axis.
- The easiest way to find 2 points on the graph is to first let the P = 0 and than let the QD = 0.
QD = -0.8P + 16
A movement ALONG and a shift IN the demand curve
If the price of a good changes, there will be a ‘movement along the demand curve’
and the old demand equation still holds.
If a change occurs in any of the other four demand factors (so apart from the price
of the good), there will be a ‘shift in the demand curve’ that illustrates a new
demand equation.
7.B. Market Supply
- A market for a good service consists of demanders and suppliers and the outcome of their
behavior will determine the price that needs to be paid and what quantities will be sold by
suppliers to demanders.
- When the price decreases, there will be more demand but less supply. And when there is less
supply, the price will go up. And when the price go up there will be less demand and the price
goes down, and there will be more demand put less supply, etc, etc, etc.
7.A. Market demand
Concrete and abstract markets
Abstract market = All the price, demand & supply factors that make up a market (e.g. the housing
market)
Concrete market = Physical place (or online) where buyers and sellers meet to trade goods (e.g. a flower
auction, marktplaats.com)
Factors of demand
- Five factors determine the total demand for a good or service:
1. Price of product or service
2. Number of demanders
3. Income of demanders
4. Price of related goods
5. Quality of and preference for the product or service
- The price of a good and its demand are normally negatively related to each other. When the
price is high demand is low. When price is low demand is high.
- The more people there are and the higher their income, the higher the demand will be.
- When restaurants will become more expensive, less people will go out and the demand for
babysitters will decrease.
- When you buy a house you will need to get a
mortgage loan with the bank.
- The houses in the social sector of the rental market
often has lower prices and are limited. But only
people with an income lower than €3670 per month
can apply for it.
Demand equation
Demand equation = Equation that shows the amount of goods that consumers are willing to buy at each
market price, assuming all other circumstances remain equal.
- The price is negatively related to the demand.
- Demand equations can ‘handle’ price changes but not other changes. So all other circumstances
have to remain equal.
, Demand curves
- In economics, the price is placed on the y-axis and the demand on the x-axis.
- The easiest way to find 2 points on the graph is to first let the P = 0 and than let the QD = 0.
QD = -0.8P + 16
A movement ALONG and a shift IN the demand curve
If the price of a good changes, there will be a ‘movement along the demand curve’
and the old demand equation still holds.
If a change occurs in any of the other four demand factors (so apart from the price
of the good), there will be a ‘shift in the demand curve’ that illustrates a new
demand equation.
7.B. Market Supply
- A market for a good service consists of demanders and suppliers and the outcome of their
behavior will determine the price that needs to be paid and what quantities will be sold by
suppliers to demanders.
- When the price decreases, there will be more demand but less supply. And when there is less
supply, the price will go up. And when the price go up there will be less demand and the price
goes down, and there will be more demand put less supply, etc, etc, etc.
