During this chapter, Mankiw dives into explaining one of the most important economic principles, supply and demand. While I thought I had a fairly solid basic understanding of what supply and demand really was, there were a lot of subtleties within the concept that I found a lot harder to grasp. I already knew before reading this chapter, or even taking Econ, that supply and demand were inversely related, meaning as one goes up, the other goes down. Some of the ideas from the chapter that were a little harder to understand were the supply and demand curves. I found the graphs slightly difficult to understand. I could understand how the graphs represented the positive or negative relationship of supply and demand, but what I did not understand was how and why you combine the individual demands to represent a market demand. I understand that you change the horizontal factors to add them together, but why don’t the other factors involved in a market change as well? Another thing I was very confused about while reading was normal good versus inferior good. The book defines these things as goods for which an increase in income leads to an increase or decrease, respectively, in demand. My question was what does the book mean by income and how does it affect demand? Is it talking about income as in income that firms pay to households? Fortunately, I understood the related topics of substitutes and complements much better than normal and inferior good.
No comments:
Post a Comment