Micro

Running Head: Economics

Economics

Shakira Hartfield

ECO/365

Principles of Microeconomics

Professor Etta Egba

August 4, 2009

Economics is a study of the production and distribution and consumption of goods and services. It is the study of production, distribution and consumption of wealth in human society. Microeconomics means the study of a small part of the economy such as business, industries or households. It is the study of the company and consumer behavior. The law of Supply is that if all other factors remain constant, an increase in supply causes a decrease in price; on the other hand a decrease in supply causes an increase in price. It also means that more quantity will be supplied at higher prices and lower quantities will be supplied at lower prices. The law of Demand is that if all other factors remain constant, an increase in demand causes an increase in prices; on the other hand a decrease in demand causes a decrease in prices. It also means that more quantity will be demanded at lower prices and lower quantities will be demanded at higher prices. There are several factors that cause a change in demand. A change in income causes a change in demand, a change in the fads and fashion also causes a change in demand and a change in the quantity demanded by the customers at a price causes a change in demand. If the number of buyers change the demand changes. Even if there is a change in the expectations in the market, there is a change in demand. Finally, if the prices of complementary goods or substitute goods changes, there will be a change in demand.

If the quantity of goods supplied at the same price changes, there is a change in supply. This may happen if there is a change in the cost of production. Another reason why there may be a change in supply is that there may be a change in technology that may influence the cost of production. If there is a change in the number of suppliers there may be a change in supply. If the expected future...