Chapter 2 - Supply and Demand

Changes in a family’s total income may lead to larger purchases of items, such as plane tickets for a summer vacation rather than a smaller road trip. Therefore, it can be inferred that the change in a family’s total income is a positive change, and can be associated with positive shifts in the economy, as larger purchases are taking place.

• The term, normal good, refers to a family’s total income increasing, as it increases the demand for goods, being considered the normal case for purchasing larger value items

• The term, inferior good, refers to the rise in a family’s total income decreasing, as it creates the demand for good when the state of affordability is in question.

An inferior good is commonly associated with negative contributing factors, as it is less desirable than expensive alternatives. This is normal, someone would rather receive expensive jewelry than a cheap gift.

It is commonly seen that people resort to purchasing the more expensive alternative when in comparison to being given the option of the inferior good. Therefore, when the normal good object is purchased, it leads to a rise in income shifts and demands that the curve must move to the left.

• The term supply price refers to the price of a given quantity at which producers will supply that price.

The terms of a normal good and inferior good can be associated with the marketing of fast fashion and the subject of changes in tastes. When public perceptions toward a specific product change, fewer people are willing to buy it, regardless of how low the price is, and thus, the demand curve shifts to the left.

Cheap food originated from the Great Depression as a prolonged economic slump led to low prices and farmers were suffering severely. In addition, citizens could simply not afford to buy food at their current prices, for which the idea of discounted and sale items for food was created. This introduced a new low standard for the quality of consumption, as it was part of an effort that the United States Government implemented on a large number of agricultural products to avoid a food scare and a state of absurd rioting due to citizens going hungry.

The price floors lead to insufficient allocation of sales among sellers as the people who were willing to sell items at a low price did not always manage to sell all of their inventory.

• The term insufficient allocation refers to the price on an item being lessened, and still not being sold, which is often associated with resulting in wasted money, potential, and lower levels of productivity.

• The term quality control refers to an upper limit on the quantity of some goods that can be bought or sold.

• The term demand price refers to the price of a given quantity of which consumers will demand that quantity.

Economics can often be associated with politics, although the connection is not often recognized, it plays a crucial role in sharing communities.

An example of the association between economics and politics can be derived from the interest groups of which politicians are confident of what they want to hear, for which politicians have the incentive to promote such opinions to be spoken.

Voicing such opinions may help the politician for their arguments, where the economist receives visibility of support from their fellow peers, as both parties are given positive affirmations or benefits.

Quality controls prevent mutuality beneficial transactions from occurring, from transactions that would benefit both the consumer and the producers.