ENDURING UNDERSTANDING

MKT-3
Individuals and firms respond to incentives and face constraints.

LEARNING OBJECTIVE ESSENTIAL KNOWLEDGE
  • MKT-3.A
    a. Define (using graphs as appropriate) key terms and factors related to consumer decision making and the law of demand.
    b. Explain (using graphs as appropriate) the relationship between price and quantity demanded and how buyers respond to incentives and constraints.
  • MKT-3.B
    Explain (using graphs as appropriate) buyers’ responses to changes in incentives and constraints.
ESSENTIAL KNOWLEDGE
  • MKT-3.A.1
    A well-defined system of property rights is necessary for the market system to function well.
  • MKT-3.A.2
    Economic agents respond to incentives.
  • MKT-3.A.3
    Individuals often respond to incentives, such as those presented by prices, but also face constraints, such as income, time, and legal and regulatory frameworks.
  • MKT-3.A.4
    The law of demand suggests that a change in the own-price causes a change in quantity demanded in the opposite direction and a movement along a demand (marginal benefit) curve.
  • MKT-3.A.5
    The conceptual relationship between price and quantity stated by the law of demand leads to downward-sloping demand curves explained by the income effect and substitution effect and/or by diminishing marginal utility.
  • MKT-3.A.6
    The market demand curve (schedule) is derived from the summation of individual demand curves (schedules).
  • MKT-3.B.1
    Changes in the determinants of consumer demand can cause the demand curve to shift.