Economics (chapter 2)

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Economics (chapter 2) by Mind Map: Economics (chapter 2)

1. What is demand?

1.1. It is a relationship between a product's price and quantity demanded

1.2. Demand is shown using a curve

1.3. The law of demand states that price and quantity demanded are inversely related

1.4. Market demand is the sum of quantities demanded by all consumers in a market

2. Changes in Demand

2.1. They are shown by shifts in the demand curve

2.2. They are also caused by changes in demand determinants

3. Demand Determinants

3.1. The number of buyers

3.2. Income

3.3. Prices of other products

3.4. Consumer expectations

4. What is Supply?

4.1. It is a relationship between a product's price and quantity supplied

4.2. The law of supply states there is a direct relationship between price and quantity supplied

5. Supply Determinants

5.1. Price of related products

5.2. Number of products

5.3. Resource prices

5.4. State of technology

5.5. Changes in nature

5.6. Producer expectations

6. Market Equilibrium

6.1. When a product is in surplus

6.1.1. There is excess supply

6.1.2. Price is pushed down

6.2. When a product is in shortage

6.2.1. There is excess demand

6.2.2. Price is pushed up

7. The Budget Line

7.1. It is drawn based on the assumption that all the consumer's budget is spent on hamburgers and milkshakes

7.2. It has a vertical intercept equal to the consumer's budget divided by the price of milkshakes

7.3. A horizontal intercept is equal to the consumer's budget divided by the price of hamburgers

7.4. It has a slope whose absolute value equals the ation of the two prices

7.5. It divides the graph into an attainable region southwest of the line, and unattainable region northeast of the line

8. The Utility Maximizing Point

8.1. The consumer maximized utility by reaching the highest possible indifference curve on the budget line

8.2. This utility-maximizing point occurs on the indifference curve that just touches the budget line at a single point