ECN 211 Notes Week 3
ECN 211 Notes Week 3 Ecn 211
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This 3 page Class Notes was uploaded by Jonathan Gonzales on Friday February 5, 2016. The Class Notes belongs to Ecn 211 at Arizona State University taught by Stefan Ruediger in Spring 2016. Since its upload, it has received 17 views. For similar materials see Macroeconomics in Economcs at Arizona State University.
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Date Created: 02/05/16
Economics Notes Day 5 • Most important point from previous class: Demand Curve Shifters • Make up your own stories to explain economic principles such as this • More outlandish stories are easier to remember • Know what causes the curve to shift and differentiate that from what causes movement along the curve • In spite of global gas price going down, prices in Saudi Arabia and Russia are going up • Budget set up according to predictions of a certain global price, if these predictions are inaccurate then local price will be adjusted • Basics of Supply • Law of Supply: As the price of a good increases, the quantity supplied increases, ceteris paribus • Quantity Supplied: The amount of a good that sellers would choose to sell at a particular price given the constraints they face • Supply Schedule: Collection of data showing quantity supplied at several different prices • Demonstrate supply curve with karaoke • Unlike demand curve, supply curve curves upward • Factors that Shift the Supply Curve • Input Prices: If one produces something, one needs input (materials needed to make something), and more expensive inputs lead to more expensive products • Price of Alternatives: Other things the firm may be producing, if the alternatives are cheaper then the good then the quantity supplied of the good will be lower • Technology: May shift supply curve to the right • Number of Firms: More people willing to sell at the same price leads to an increase in quantity supplied • Sum of all units supplied at a consistent price • Expectations: Predictions about what the price will be in the future • If one expects the price in the future to be higher than it is now, then suppliers will wait • Changes in weather/Natural Events: If production line blows up, you can’t sell as much (Terrorism?) • Especially relevant to farming • Other Shift Variables: Government taxes shift the supply curve to the left (Percentage tax rotates the curve rather than shifting it along a straight line) • Be careful! Rightward curve movement represents an increase in supply, even though it may appear visually to be a decrease • Increase in Quantity Supplied = Rightward Shift • Decrease in Quantity Supplied = Leftward Shift • Recommended: Planet Money podcast • Again: Do not conflate curve shifts with movement along the curve • Difference: Curve shifts represent changes in quantity supplied at a constant price, movement along the curve represents changes in both quantity supplied and price Economics Notes Day 6 • Basics of Demand • Quantity demanded is single point of the demand curve • Change in quantity demanded caused by change of price, and thus is a movement along the curve • Shifts in demand caused by numerous factors • Increase of Demand: Rightward shift • Decrease of Demand: Leftward shift • Basics of Supply • Quantity supplied is a single point on the supply curve • Change in quantity supplied caused by change of price, and thus is a movement along the curve • Shifts in supply caused by numerous factors • Increase of Supply: Rightward shift • Decrease of Supply: Leftward shift • Supply and Demand • Upward slope in supply, downward slope in demand, which (for the purposes of this class) always intersect • Equilibrium Price: Market price that remains constant until either curve shifts, intersection of curves • Equilibrium Quantity: Market quantity that remains constant until either curve shifts, intersection of curves • Price lower than equilibrium price: Excess demand, people willing to buy, but suppliers not willing to sell • This increases the price until equilibrium is reached • Sometimes this is impossible • Price higher than equilibrium price: Excess supply, suppliers willing to sell, but people not willing to buy • This decreases the price until equilibrium is reached • Moves toward equilibrium are not necessarily constant, price may change up and down, approaching equilibrium • Supply curves tend to be more linear than curved • When Things Change • Increase in Demand • Rightward shift of demand curve • Rightward movement along supply curve • Higher equilibrium price • Higher equilibrium quantity • Decrease in Supply • Leftward shift of supply curve • Leftward movement along demand curve • Higher equilibrium price • Lower equilibrium quantity • If it were possible to sell things cheaper, it would have been done so as to best capture the market • Recall that individual firms are very small compared to the market • Inelastic demand creates steeper demand curves • Companies influence this with advertising, monopolistic competition • Increase in Demand and Decrease in Supply • Rightward shift of demand curve • Leftward shift of supply curve • Higher equilibrium price • Higher/Lower/Constant equilibrium quantity, more information needed to make any statement about this (How much did demand increase/supply decrease?) • Vocabulary • Change in Supply: Shift in supply curve • Caused by things other than the price • Change in the Quantity Supplied: Movement along a fixed supply curve • Caused by changes in price • Change in Demand: Shift in demand curve • Caused by things other than the price • Change in the Quantity Demanded • Caused by changes in price • Oil Price: Why does it fluctuate so much? • Drastic fluctuations in supply • Even more drastic fluctuations in demand • Very rare for supply and demand to be equal • Currently excess supply • Oil is a competitive market with many suppliers and many buyers • Conflicts in the Middle East shift supply to the left
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