Intro to Food and Resource Economics Week Three
Intro to Food and Resource Economics Week Three 2713
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This 6 page Class Notes was uploaded by Taylor Baker on Thursday September 1, 2016. The Class Notes belongs to 2713 at Mississippi State University taught by Danny Barefield in Fall 2016. Since its upload, it has received 15 views. For similar materials see Intro to Food & Resource Econ in agricultural economics at Mississippi State University.
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Date Created: 09/01/16
Intro to Food and Resource Economics Week three - August 29- September 2, 2016 - Market Demand is the sum of what buyer 1 and buyer 2 purchased at the same price Price Buyer 1 Buyer 2 Market Demand $0.00 16 8 24 - what if something other that price changes? - demand curve shifters: - change in population - change in income - normal goods - inferior goods - change in the price of other goods - compliments - substitutes - change in tastes and preferences - changes in expectations - change in population (market) - increase in market population increases the demand for a good. decreases in market population decreases the demand for a good. - changes in income - an increase in income increases the demand for a normal good. decreases of income decreases the demand for a normal good. - an increase in income decreases the demand for an inferior good. decrease in income increases the demand for an inferior good. - changes in the prices of other goods - an increase in the price of another good (i.e. auto insurance) causes an upward movement along the demand curve for that good. - an increase in the price of that good (auto insurance) causes a decrease in the demand for another good (i.e. a new car) - the car is a complement (things that you consume together) to the insurance - change in the price of a substitute - a decrease in the price of one good causes a downward movement along the demand curve for that good (i.e. an android phone) - changes in expectations - an increase in the level of expectations increase demand for a normal good (if the expectations are about income). decreases in expectations decreases demand for a normal good. (the below graph is VERY important!!!) Variable Increase in the variable Decrease in the variable Price causes a downward movement along causes an upward movement along the demathe demand curve; curve does not shift curve; curve does not shift Population (market) shifts to the right (increases) shifts demand to the left (decreases) Income shifts demand to the right (increases) shifts demand to the left (decreases) Price of related goods Price of Complements shifts to the left (decreases) shifts to the right (increases) Price of Substitutesshifts to the right (increases) shifts to the left (decreases) Tastes and Preferencesshifts to the right (increases) shifts to the left (decreases Expectations shifts to the right (increases) shifts to the left (decreases) - Example: - draw the demand curve for “hard copy” textbooks for MSU. what What happens to this demand in each of these scenarios? Why? ▪ The price of hard copy textbooks increases The price of electronic textbooks increases ▪ ▪ There is an unusually large high school graduating class ▪ An article appears in the Clarion Ledger indicating that college graduates enjoy a higher standard of living than previously thought ▪ An increase in the price of crude oil brings about new oil exploration activities in Mississippi and much higher paying jobs for unskilled and semi-skilled laborers - Market for “hard copy” textbooks - if the price for hard copy textbooks increases, this will cause a upward movement along the demand curve - an increase in the price is shown from P1 to P2 and the resulting decrease in quantity demand is shown from Qd1 to Qd2. (p2 being the second point in time) - if we consider electronic textbooks to be a substitute for hard copy textbooks, then an increase in the price of electronic textbooks will result in an increase in the demand for hard copy textbooks. - if there is a large high school graduating class, then it is likely that there will be a larger population (market) for college and the demand for all college textbooks (including hard copy textbooks) will increase. - the gist of this article is that if you obtain a college education, then you should expect an increase in your standard of living. this should have the effect increase the market’s demand for a college education (a complement of hard copy textbooks) and therefore increasing the demand for hard copy textbooks. - supply: - quantity supplied of any good is the amount of the good that sellers are willing and able to sell at specific prices - the law of supply is the claim that the quantity supplied of a good rises when the price of the good rises, other things being equal (ceterus paribus) - Supply Schedule: - the supply schedule is a table that shows the relationship between a good’s price and the quantity supplied - example: the supply of lattes by a coffee shop for lattes in a non-finals week - notice that these preferences obey the law of supply - the supply cure goes up and to the right rather than the demand curve that goes up and to the left - Individual Firm Supply vs Market Supply - The previous example is one of an individual firm’s supply of lattes • The quantity supplied in the market is the sum of quantities supplied by all sellers at each price • Suppose there are only two sellers in the latte market Price Seller 1 s Seller 2 s Market Q s $0.00 0 0 0 $1.00 3 2 5 $2.00 6 4 10 $3.00 9 6 15 $4.00 12 8 20 $5.00 15 10 25 $6.00 18 12 30 - Supply Curve: -The supply curve shows how price affects quantity supplied, ceterus paribus -if the price increases from 2$ to 5$, Qs will increase from 10 to 25 -price allows movement along the supply curve - What if something other than price changes: -supply curve shifters: -change in input prices -change in technology -change in population (# of sellers) -change in expectations - Equilibrium: the state where price has reached the level where quantity supplied equals quantity demanded
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