Economics Demand and Supply Overview

Study Notes

Demand refers to the quantity of a good or service that consumers are willing and able to purchase at different price levels.
Supply describes the quantity of a good or service that producers are willing and able to sell at various prices.

Law of Demand: As the price of a good decreases, the quantity demanded increases, and vice versa.
Substitute Good: A product that can replace another; if the price of one rises, demand for the substitute may increase.
Complementary Good: A product that is used in conjunction with another; if the price of one rises, demand for the complement may decrease.
Law of Supply: Higher prices typically lead to an increase in the quantity supplied.
Revenue: The total income generated from sales of goods and services.
Elasticity: A measure of how much demand or supply responds to changes in price.

"Star Wars: Episode IV – A New Hope" premiered in 1977 and became a cultural phenomenon, leading to unprecedented demand for tickets.
The movie ran for 18 months in theaters and grossed over 775millionworldwideinitially,translatingtoabout775 million worldwide initially, translating to about 775millionworldwideinitially,translatingtoabout1.5 billion in 2017 dollars.
Initial expectations for the film's success were low, with minimal marketing support from 20th Century Fox, reflecting a mismatch between perceived value and actual consumer demand.

Consumers must be both willing and able to buy an item to contribute to its demand.
Example: A consumer may want the latest phone but will not purchase it if it exceeds their budget.
Price influences purchasing decisions significantly; a lower price generally increases the likelihood of purchase.

Quantity demanded refers to the specific amount of a good consumers are willing and able to buy at a given price.
The relationship between price and quantity demanded is crucial for understanding market dynamics and consumer behavior.