ECONOMICS

CONTINUED NOTES

2. Market Size (population)

·      If population increases then the demand for goods in that area will increase. 

o   EXAMPLE: If there is a new apartment building that houses 100 families, there will be an increase for the demand of Kroger.

3.Income- The money that you make. If you make more money then you buy more stuff.

DIFFERENT TYPES OF GOODS

1. Normal Good:

As you make more money then you will demand (buy) more of the product

2. Inferior Good

As you make more money you will buy less of the product.

3. Neutral Good

No matter how much money you will make you will buy the same amount of a product

PRICES OF RELATED GOODS

Substitute Goods

Þ   Products that can be replaced by each other. 

o   EXAMPLE: Burger King Whopper vs. Wendy’s Singles

Complementary Goods

Þ   Items that go together that will affect each other’s price.

o   EXAMPLE: Peanut butter and jelly. If there is a sell on Peanut Butter then the store will probably sell more jelly, too.

Examples of questions on the test:

Þ   The demand for product a goes down causing the demand of product b to go up. Substitute Goods

Þ   The price of product a goes up making the demand for product b to go up. Substitute Goods

Consumer Expectations

If you were expecting to get a raise then you will likely spend money buying something you would probably not buy (expecting a tax refund). You plan on going on a vacation in a few weeks; you will cut back your spending. 

Technology

As technology improves, that causes the demand of other items to decrease.

FOR EXAMPLE: You are more likely to buy a cell phone that is the most technologically advanced. You may not buy a watch because you are using your cell phone. The demand for watches went down.

Elasticity

The degree or amount that the demand of a certain product changes, as the price of that item changes.

(How much the demand of a product can change.) 

Inelastic

If the demand of a product does not change when price changes. 

EXAMPLE: prescription drugs Insulin demand will never change. 

TEST REVIEW

Consumer tastes and preferences Influence demand.

Price goes up demand goes down.

Income: as you make more money , you

Positive outlook on a company, demand would go up.