1. The document defines key concepts in macroeconomics related to supply and demand, including the barter market, demand curves, laws of demand and supply, equilibrium, elasticity, and more. 2. It explains factors that shift demand and supply curves like price, income, tastes, technology, and expectations. Changes in these determinants can cause curves to shift left or right. 3. Market equilibrium exists where the supply and demand curves intersect, establishing an equilibrium price and quantity where the amounts suppliers are willing to offer equals the amounts buyers want.

1. Macroeconomics Week 2-3

2. THE BARTER MARKET 1 www.investopedia.com

3. MARKET is a group of buyers and sellers of a particular good or service. It brings together “demanders” and “suppliers.” BUYER “Demanders” SELLER “Suppliers” GOODS PRICE

4. DEMAND is a schedule or a curve that shows the various amounts of a product that consumers are willing and able to purchase at each of a series of possible prices during a specified period of time.

6. Diminishing marginal utility

7. Income and substitution effects. DEMAND RELATIONSHIP

8. More product at a lower price Diminishing Marginal Utility It is a phenomenon wherein the satisfaction or utility derived by an individual or buyer diminishes as he/she consumes additional unit of a particular good.

9. Income effect A lower price increases the purchasing power of a buyer’s income, enabling the buyer to purchase more of a good than before. Substitution effect Suggests that a lower price, buyers have the incentive to substitute what is now a less expensive product for similar products that are now more relatively expensive.

10. Tastes Price Income No. of buyers Expectations Price of substitutes

11. Demand Curve is the inverse or negative relationship between the price and quantity demanded for a particular good represented in a graph. Market Demand is the summation of the quantity demanded by all consumers in the market at each various possible prices.

12. Change in Quantity Demanded It is a movement of the price-quantity demanded combination from one point to another on a fixed demand schedule or demand curve.

17. Input prices Technology Price Taxes and subsidiaries

18. Producer’s Expectations No. of sellers Price of other goods

19. Supply Curve is the direct or positive relationship between the price and quantity supplied for a particular good represented in a graph. Market Supply is the summation of the quantity supplied by all producers in the market at each various possible prices.

20. Change in Quantity Supplied It is a movement of the price-quantity supplied combination from one point to another on a fixed supply schedule or supply curve.

23. Market Surplus is a situation in which a quantity supplied is greater than quantity demanded.

24. Market Shortage is a situation in which quantity demanded is greater than quantity supplied.

25. Elasticity is the degree to which a demand or supply curve reacts to a change in price. To determine elasticity: Elasticity = (% change in quantity ) (% change in price)

26. Price Elasticity of Demand (Ed) is the responsiveness (or sensitivity) of consumers to a price change. To determine the Price Elasticity of Demand (Ed): Ed = Qd / Qd = % change in quantity demanded P / P % change in price

28. INELASTIC DEMAND Ed is < 1

32. COMPLEMENTARY GOODS Exy is < 1

34. UNIT ELASTIC Es is = 1

36. INELASTIC Es is < 1

38. The price elasticity of supply is greater in the long-run than in the short-run. This happens because more resources can be shifted to the production of the good in the long-run.