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1.1 Law of Demand
The law of demand states that if all factors remain equal, the higher the price of a good the less people will demand. In other words the higher the price the lower the quantity demanded. The amount of a good that buyers purchase at a high price is less because as the price goes up, so too does the opportunity cost for buying that product.
People will avoid buying a higher priced good if it forces them to forgo the consumption of something else they value more.
Both points are on the demand curve. Each point reflects a direct correlation between quantity and Price. It shows that the higher the price the lower the quantity demand quantity.
The Law of Demand implies the following with respect to a demand curve (all of these say exactly the same thing):
• The demand curve is downward sloping
• The demand curve has a negative slope
• The demand curve shows an inverse relationship between price and quantity demanded
1.2 Eight Market Equilibrium Changes
Change 1: Demand Increase
Change 2: Demand Decrease
Change 3: Supply Decrease
Change 4: Supply Increase
Change 5: Demand and Supply Increase
Change 6: Demand and Supply Decrease
Change 7: Demand Increase and Supply Decrease
Change 8: Demand Decrease and Supply Increase
1.3 Long Run Equilibrium in perfect competition
In long run equilibrium in perfect competition, P=MC=AC=AR
Profits and ...