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Scarcity is not a requirement for a market to exist.
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The law of demand states that the [blank_start]quantity demanded[blank_end] for a good or service falls as its [blank_start]price[blank_end] rises. The demand curve shows an [blank_start]inverse[blank_end] relationship between these.
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quantity demanded
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price
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inverse
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Three Causes of Negative Relationship between Price and Quantity Demanded
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[blank_start]Income[blank_end] Effect: As price falls, the real income of consumers rises.
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[blank_start]Substitution[blank_end] Effect: As the price of a good or service falls, more customers are able to pay, so they are more likely to buy the product.
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[blank_start]Diminishing Marginal Returns[blank_end]: As people consume more of a particular good or service, the utility gained from the marginal unit declines, so customers will only purchase more at a lower price.
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Non-Price Determinants of Demand (HIS AGE)
H: [blank_start]Habits[blank_end]
I: [blank_start]Income[blank_end]
S: [blank_start]Substitutes[blank_end]
A: [blank_start]Advertising[blank_end]
G: [blank_start]Government Policies[blank_end]
E: [blank_start]Economy[blank_end]
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Habits
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Income
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Substitutes
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Advertising
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Government Policies
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Economy
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The demand for [blank_start]normal[blank_end] goods rises with an increase in income. The demand for [blank_start]inferior[blank_end] goods rises with a decrease in income.
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A price rise will cause a [blank_start]contraction[blank_end] in the quantity demanded for the product. A price fall will cause an [blank_start]expansion[blank_end] in the quantity demanded.
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Qd = a - bP where (a) is demand, irrespective of price and (-b) is the slope of the demand curve
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The Law of Supply states there is a positive relationship between the [blank_start]Quantity Supplied[blank_end] of the Product and its [blank_start]price[blank_end].
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Supply is the willingness and ability of firms to provide a good or service at a given price level, per time period.
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A [blank_start]shift[blank_end] in supply is caused by changes in non-price factors that affect supply. A [blank_start]movement[blank_end] in supply is caused only by changes in price.
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Non-Price Determinants of Supply (SWATCH)
S: [blank_start]Subsidies[blank_end]
W: [blank_start]Weather[blank_end]
A: [blank_start]Advancements in Technology[blank_end]
T: [blank_start]Time[blank_end]
C: [blank_start]Competitive Supply[blank_end]
H: [blank_start]Hurdles[blank_end]
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Qs = c + dP where (c) is the slope and (+d) is the supply, irrespective of price.
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The [blank_start]signaling function[blank_end] of price tells producers whether to enter or leave the market.
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signaling function
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incentive function
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Which is the consumer and producer surplus?
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Consumer Surplus
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Producer Surplus
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Consumer Surplus
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Producer Surplus
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Label the production possibility curve (PPC).
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Unattainable without Economic Growth
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Allocative Inefficiency
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Allocative Efficiency
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Unattainable without Economic Growth
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Allocative Inefficency
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Allocative Efficiency
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Unattainable without Economic Growth
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Allocative Efficiency
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Allocative Inefficiency
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With allocative efficiency, no one can be made better off without making someone worse off.