ECON 142 Week 2 Notes
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This 3 page Class Notes was uploaded by Noah Johnston on Thursday September 1, 2016. The Class Notes belongs to Econ 142 at Kansas taught by Dr. Brian Staihr in Fall 2016. Since its upload, it has received 38 views. For similar materials see Microeconomics in Economics at Kansas.
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Date Created: 09/01/16
ECON 142 Week 2 Notes Demand Shift Factors (1 and 2 are located on Week 1 Notes) 3. A change in taste/preferences If something gets popular, demand curve moves to the right. If something falls out of style, demand curve shifts to the left. 4. A change in expectations If people expect the price of a good to be higher in the near future, demand curve will shift to the right in the present. If they expect the price to be lower in the future, they’ll wait to buy and the demand curve will shift to the left in the present. 5. Population and demographics Could also be considered the “number of buyers”. As overall population increases, so does the number of buyers, so demand increases and shifts to the right. As SPECIFIC types of population increase, different types of products will increase in demand. SUPPLY Supply curve slopes up while demand curve slopes down. Just like with demand, when you change the price, you move along the curve, and its called a change in the quantity supplied. But when you change something else, it’s a change in supply. Supply Shifters 1. A change in technology A positive technology change: A new way to make something, or a breakthrough of some sort will result in a supply curve shift to the right! A negative technology: If a factory blows up or something, will result in a shift to the left. 2. A change in the price of inputs Materials needed to make a product (like burger for McDonalds) are called inputs. If the price of burger goes up, supply curve will shift to the left. If the price of burger goes down, then curve will shift to the right. 3. A change in expectation This affects the opposite way of demand. With supply curves, if you think prices will go down in the future, then you supply more today. If you think prices will go up in the future, then you supply less today. 4. A change in the number of sellers This one is pretty self-explanatory: an increase in the number of sellers will increase the supply curve, and vice versa. 5. A change in prices of substitutes in production Let’s say a farmer in Kansas has 400 acres of land, and currently grows wheat with his land. He could use this land to supply soybeans, though. The price of soybeans skyrockets, and the farmer decides to switch to soybeans because he can make a lot more money. The supply of wheat has now decreased, causing a shift to the left. Equilibrium: The price and quantity for supply and demand is equal at a specific number. If market price is above equilibrium, people want to supply this. But few want to demand it since the price is so high, so you’ll have excess supply. That’s when they lower the price so they can get rid of their excess. If market price is below equilibrium, few want to supply, but everyone wants to buy. Suppliers will increase the price to decrease the demand, and this will get it back towards equilibrium. Chapter 4 Consumer Surplus: the difference between what one is willing to pay and what one has to pay. Measured in dollars. P=a-b(Q) ------> Inverse Demand Function (slopes down) When it is ‘Q=’ -----> Demand Function (slopes down) P=a+b(Q) -----> Inverse Supply Function (Slopes up) When it is ‘Q=” -----> Supply Function (slopes up) To find equilibrium, set the supply and demand equations equal to each other! Customer are better off when customer surplus gets bigger, and worse off when it gets lower. Producer Surplus: Difference between lowest price a company would accept and price it actually receives for a good or service. Both of these surpluses combined is called the economic surplus. Deadweight Loss: Reduction in economic surplus that results when the market isn’t efficient. THINGS TO REMEMBER: The 5 things that affect demand curve and the 5 that affect supply curve. Staihr said multiple times these will be all over the tests! Also, the equations to find supply and demand will be used all semester as well.
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