Demand is the amount of good or service a consumer is willing and able to buy per period of time.
The graph shows a movement along the curve, which illustrates how the quantity demanded is affected by price.
The Law of Demand is the inverse relationship between price and quantity demanded. It holds true because of:
1. The Substitution Effect – if the price of a substitute of good X goes up, then good will become relatively cheaper and people will move towards good X.
2. The Income Effect – if the price of good X rises, then consumer’s purchasing power will drop and then people will tend to buy less of good X will the same income.Read More»
Apple has been roughly selling over 50 million iPods annually for the past 4 years. iPods are sold across 103 countries (officially through the country’s individual Apple store page). They come in different sizes, capacities, colors and most importantly prices.
Since an iPod nano (8GB), is the same product in all countries, shouldn’t it be priced closely?
The assumption here is that there are no transportation costs (very hypothetical) and trade flows freely across all borders (i.e. no tariffs). It is fair to also assume has a large market share and monopoly power all over the world in mp3 players, so demand shouldn’t affect price as much.Read More»
One way to show growth in an economy is by an outward shift in its Production Possibility Curve (PPC). Another way to define growth is the increase in a country’s total output or Gross Domestic Product (GDP).
Growth Occurs When:
1. Discovery of new mineral/metal deposits
2. Number of people in the work force increase or the quality of the work force improves (training, education)
3. There is an increase in capital and machinery
4. There is an improvement in technologyRead More»