Microeconomics Chapter 2 - Week 3 Notes
Microeconomics Chapter 2 - Week 3 Notes ECON 2010
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This 8 page Class Notes was uploaded by Alexis Newcomer on Sunday January 31, 2016. The Class Notes belongs to ECON 2010 at Western Michigan University taught by Bill Kern in Winter 2016. Since its upload, it has received 16 views. For similar materials see Principles of Microeconomics in Economcs at Western Michigan University.
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Date Created: 01/31/16
Microeconomics Lecture Notes Chapter 2 Week 3 Key idea: the supply and demand for a good determine its price and quantity Supply and Demand Determinant of Demand: price Demand Demand Schedule: Price/Unit Quantity Demanded 5 2 4 4 3 7 2 11 1 16 Demand is a schedule or curve that shows the various amounts of a good or service that buyers are willing and able to purchase at various possible prices during a specific time period Demand Curve The Law of Demand: the price and quantity demanded of a good are inversely related (ceteris paribus – everything remains constant) o Price goes down; Quantity goes up o Price goes up; Quantity goes down Substitution: replacing other goods – it is rising relative to other goods Gifffen good: one in which the law of demand doesn’t hold o Has never happened Market Demand: the sum of the individual demands for the good at each price Joe + Nancy = Market P Qd P Qd P Qd 5 1 5 4 5 5 4 2 4 6 4 8 3 3 3 8 3 11 2 4 2 10 2 14 1 5 1 12 1 17 Non-Price Determinants of Demand: o Tastes o Number of buyers o Income o Prices of related goods o Expected goods Changes in Demand: Shifts in the Demand Curve Change in Quantity Demanded: caused by a change in price Supply Supply Schedule P/Unit Qs/Time (quantity supply) 5 12 4 10 3 7 2 4 1 1 Supply is a schedule or curve that shows the various amounts of a good or service that producers will make available for sale at various possible pries during a specific time period Supply Curve The Law of Supply: the price and quantity supplied of a good are positively related o Ceteris Paribus o Price goes up; Quantity goes up o Price goes down; Quantity goes down Market Supply: the sum of individual firm’s quantity supplied at each price Other Detriments of Supply: Resource prices Technology Taxes or subsidies Prices of goods Number of sellers Expected future price Changes in Supply: shifts in the supply curve Changes in Quantity Supplied Supply and Demand Together: Market Equilibrium P Qd Qs Surplus or Shortage 5 2 12 +10 surplus 4 4 10 +6 3 7 7 Qd = Qs (equilibrium price in quantity) 2 11 4 -7 1 16 1 -15 shortage Surplus: when supply is greater than demand Shortage: when demand is greater than supply Surpluses arise when prices are too high Shortages occur when prices are too low * If the price is at $4, we would have a surplus