Chapta 5

Chapter 5 is all about elasticity of supply and demand. Elasticity is the measure of the responsiveness of quantity demanded or quantity supplied to one of its determinants. Price elasticity of demand is a measure if how much the quantity demanded of a good responds to change in the price of that good computed as the percentage chance in the quantity demanded divided by the percentage change in price. There is also cross price elasticity and Income elasticity. Cross price elasticity is a measure of how much the quantity demanded of one good responds to a change in the price of another good computed as the percentage change in quantity demanded by the percentage change in the price of the second good. Income elasticity of demand is a measure of how much the quantity demanded of a good responds to a change in consumers income computed as the percentage change in quantity demanded divided by the percentage income.

Chapta 4

Chapter 4 is all about markets and supply and demand. Competitive markets are groups with a lot of buyers and sellers so that not one person can influence the market. Perfectly competitive markets are markets where all goods are exactly the same and sellers are so numerous that no single person can make an impact. Price takers can buy all they want or sell all they want at a set price in a perfectly competitive market.  Quantity Demanded is the amount of a good demanded.  Law of demand is the quantity demanded of a good falls when a price of a good falls. Demand curve is the graph that shows the relationship between the price of a good and the quantity demanded. Market demand is the sum of all individual demands for a particular good or service.  normal foods are a good for which other things equal an increase in income leads to increase in demand for these products. Inferior goods increase in income means decrease in these goods. Substitutes are two goods for which an increase in the price of one leads to a decrease in demand for the other. Compliments are two goods for which an increase in the price of one leads to a decrease in demand for the other.