| Microeconomics is a concern with | | | | as the price level increases, all other factors remaining |
| 1. Determining the price we pay for products and | | | | constant. |
| services. | | | | The Law of Supply determines asa) The quantity |
| 2. What output is required by the market place. | | | | supplied increases as price increases.b) The quantity |
| 3. The impact of the government's intervention in | | | | supplied decreases as price decreases.c) Producers |
| market forces.Understand the microeconomics will help | | | | increase the supply as their product prices rise. |
| us to analyze the fundamental nature of supply and | | | | C. Equilibrium of Demand and supply When the price |
| demand concepts and how they influence the | | | | fall to the level the buyers are willing to pay, this |
| operation of a market economy. | | | | produces equilibrium. The opposite effect occurs when |
| A. Demand | | | | prices are too low. In fact, the forces of demand and |
| In terms of microeconomics,demand is defined as the | | | | supply lead to an equilibrium price and quantity.a) As |
| relationship between the price of a product and the | | | | demand is greater than supply, price levels increase.b) |
| consumer willingness to purchase a certain quality.The | | | | As supply is greater than demand, price levels |
| law of demand also determine the price and quality | | | | decrease.c) Only one price guarantees equilibrium |
| sold, if the price of certain increase then the qualities of | | | | D. Other influences |
| product sold decrease and the price of certain | | | | There are four fundamental shifts we can examine, |
| decrease then the qualities of product sold increase. | | | | each shift having an effect on supply or demand:a) |
| B. Supply Supply decisions reflect a supplier willingness | | | | Positive demand shift will increase demand.b) Negative |
| to produce and sell at the prevailing market price and | | | | demand shift will decrease in demand.c) Positive |
| these factors all influence the supplier qualities. supplied. | | | | supply shift will increase demand. Negative supply shift |
| For most products, the quantity supplied will increase | | | | will decrease in demand. |