Microeconomics: Demand and Supply

The main determinants of demand are price, consumer preferences, income, price of related goods, population, and technology. Changes in these determinants can cause shifts in the demand curve, leading to changes in the quantity demanded.

The law of demand states that, ceteris paribus, as the price of a good increases, the quantity demanded of that good decreases. This is because consumers will seek to minimize their expenditure and may opt for alternative goods or reduce their consumption.

Price elasticity of demand measures how responsive the quantity demanded is to changes in price, while income elasticity of demand measures how responsive the quantity demanded is to changes in income. Both are important in understanding consumer behavior.

<p>The law of supply states that, ceteris paribus, as the price of a good increases, the quantity supplied of that good also increases. This is because producers are motivated to produce more at higher prices, which increases their revenue.</p> Signup and view all the answers

<p>Internal economies of scale refer to the cost advantages that a firm can achieve through its own expansion, such as reducing average costs through mass production. External economies of scale refer to the cost advantages that arise from the growth of an industry as a whole, such as the development of specialized labor markets.</p> Signup and view all the answers