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Econ 2000 week two of notes

by: Eliza Barrett

Econ 2000 week two of notes Econ 2000

Marketplace > Clemson University > Economcs > Econ 2000 > Econ 2000 week two of notes
Eliza Barrett
GPA 3.4

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Chapter 3
Intro to economics
Jonathan Ernest
Class Notes
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This 4 page Class Notes was uploaded by Eliza Barrett on Tuesday January 26, 2016. The Class Notes belongs to Econ 2000 at Clemson University taught by Jonathan Ernest in Spring 2016. Since its upload, it has received 39 views. For similar materials see Intro to economics in Economcs at Clemson University.

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Date Created: 01/26/16
Eliza Barrett Econ 2000 Lecture 5: Demand Shifts, Supply, and Supply Shifts - Change in quantity demanded vs change in demand • Change in quantity demanded - a movement along the demand curve is a change in the quantity demanded • it’s caused by a change in the price of the good • Change in demand - a shift of the entire demand curve • caused by a change in something other than price - can also think of changing the demand schedule - increase in demand: a shift out/up to the right - decrease in demand: shift in/down to the left - Demand shifters: • Changes in income - normal good: a good which we buy more of when we get more income • exhibits a direct relationship between income and demand - increased income: increased demand for a normal good - ex: steak, housing, laptop, TV, restaurant meals, name-brand clothing - inferior good: a good which we buy less of when we get more income • exhibits an inverse relationship between income and demand - increase income: decreased demand for an inferior good - ex: SPAM, Ramen, Mac ’n’cheese, store-brand goods, secondhand clothing • Price of Related Goods - Complements • two goods used together • inverse relationship between the price of good X and demand for good Y - biscuits and gravy, milk and cereal, printers and toner - Substitutes • goods that can be used in place of each other - direct relationship between the price of good X and demand for good Y • coke and pepsi, snickers and milky way, butter and margarine • Changes in Tastes and Preferences - when a good becomes more fashionable or “in season” - When consumers obtain new information about a good (could be good or bad) • ex- CDC reports chocolate causes improved memory • Future expectations - consumption today can depend on what you think the price may be tomorrow • what would you do if you were pretty sure that the price of gas next week would be $0.35/gal cheaper than it is today? • Number of buyers in the market - the size of the market affects the market demand curve • more individuals means higher market demand affected by aging, immigration, war, birth rates, etc • - Supply - Quantity supplied • The amount of the good or service that producers are willing and able to sell at the current price - Supply • Supply schedule: table showing the relationship between price and quantity supplied • supply curve: graphical representation of the relationship between price and quantity supplied • Just as with Demand, we can construct the Market Supply by adding up the individual supply curves/schedules • Supply curve generally upward sloping - lowest cost suppliers enter market first - willing to invest more and draw in more expensive resources when price is high • Decrease in supply: moves inward/to the left • Increase: out/to the right • Supply shifters - The cost of inputs • If the cost of inputs goes down: supply increases - Changes in technology • if you get more knowledge about how to produce a product, you can produce more t a lower price - increase in tech: supply increases - Taxes and subsidies • taxes are like an added cost of production - increase in taxes: supply decreases - think of a subsidy as the opposite of a tax - Number of sellers • more individual seller: more market supply • similar to number of buyers in Demand shifter - Price expectations • if you expect prices for your final good to rise next week, do you want to sell now or later? • inverse relationship between tomorrows expected price and todays Lecture 6: Equilibrium and Simultaneous Shifts - The market forces of Demand snd Supply work simultaneously to determine the price - The price of any good in a competitive market will adjust to where • quantity supplied=quantity demanded - Equilibrium point: the intersection, balancing point between the two opposing forces - equilibrium price: price that causes quantity supplied to equal quantity demanded, “price clears the market - equilibrium quantity: numerical quantity at the equilibrium price - Shortage - when Qs<Qd - Surplus • when Qs>Qd • occurs when price is above equilibrium • What do we expect to happen to price over time - price will fall until reaching the equilibrium price - suppose the price of a candy bar increases, what happens in terms of demand? • The quantity demanded of candy bars decreases - shortage in the market for avocados. assuming a competitive and unrestrained market, what happens over time? • the price of avocados will rise, and the market will eventually reach equilibrium - which of the following will most likely cause a decrease in the supply of most fruits and veggies? • harsh punishments for farmers that hire undocumented workers - Simultaneous Shifts - supply shifts- factors that change production costs - demand- factors that change our willingness to pay for goods • what happens if both demand and supply shift at the same time market for salmon - an unusually stormy seasons hits the northwest US- causes a decrease in supply of salmon - a medical journal reports that people who consume salmon live longer- increase in demand for salmon - results of the simultaneous shifts • a decrease in the supply of salmon • by itself, a decrease in supply leads to higher equilibrium prince low equilibrium quantity - an increase in the demand for salmon • by itself, an increase in demand leads • higher equilibrium price


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