Markets, Supply , Demand and Elasticity
3 important questions on Markets, Supply , Demand and Elasticity
Seller's reservation price
The smallest money amount for which a seller would be willing to sell an additional unit, generally equal to marginal cost
Factors that cause an increase (rightward or upward shift) in demand:
- A decrease in the price of complements to the good or service
- An increase in the price of substitutes for the good or service
- An increase in income (for a normal good)
- An increased preference by demanders for the good or service
- An increase in the population of potential buyers
- An expectation of higher prices in the future
When these factore move in the opposite direction, demand will shift left
Social optimal quantity
The quantity of a good that results in the maximum possible economic surplus from producing and consuming the good
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