Markets, Supply , Demand and Elasticity

3 important questions on Markets, Supply , Demand and Elasticity

Seller's reservation price

The smallest money amount for which a seller would be willing to sell an additional unit, generally equal to marginal cost

Factors that cause an increase (rightward or upward shift) in demand:

  1. A decrease in the price of complements to the good or service
  2. An increase in the price of substitutes for the good or service
  3. An increase in income (for a normal good)
  4. An increased preference by demanders for the good or service
  5. An increase in the population of potential buyers
  6. An expectation of higher prices in the future

When these factore move in the opposite direction, demand will shift left

Social optimal quantity

The quantity of a good that results in the maximum possible economic surplus from producing and consuming the good

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