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ECON 2105 Week 3 notes

by: Randi

ECON 2105 Week 3 notes ECON 2105

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About this Document

These notes cover law of supply and demand. They also cover graphing the supply and demand functions
Class Notes
supply, demand, quantitydemanded, Expectations, consumers, quantitysupplied, market
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This 4 page Class Notes was uploaded by Randi on Saturday September 3, 2016. The Class Notes belongs to ECON 2105 at University of Georgia taught by McWhite in Summer 2016. Since its upload, it has received 9 views. For similar materials see Macroeconomics in Macro Economics at University of Georgia.


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Date Created: 09/03/16
Week 3 Notes ECON 2105 PROF. MCWHITE RECAP:  Law of Demand: o Ceteris paribus o As prices decrease, quantity demanded of a good will increase o As prices increase, quantity demanded of a good will decrease  This is an inverse relationship!! o ONLY a change in PRICE causes a change in QUANTITY DEMANDED What causes a change in DEMAND? Everything EXCPET the price of the product! 1. Consumer income 2. Prices of related goods (substitutes/compliments) 3. Consumer tastes 4. Expectations of future events 5. Number of buyers in the market VOCAB Relating to the Law of Demand:  Normal Goods: o When income increases, demand increases (shifts right) o Example: You enjoy steak. When your income increased, you began to buy more steak. Price Demand 2 Demand 1 Quantity Demand ed Week 3 Notes  Inferior Goods: o As income increases, demand for a good decreases (shifts left) o Example: You usually buy a lot of spam when you are tight on money. As your income increases, instead of buying spam, you choose to buy more steak. Price Market for Spam D2 D1 Quantity Demand ed  Substitutes o These are goods that are pretty much the same and can be substituted o As the price for one good increase, the demand for its substitute increase o For example: As the price for Pepsi increases, the demand for Coke increases o Market for Coke Price D2 D1 Quantity Demand ed Week 3 Notes  Compliments o A good that goes along with another good o For example: You always eat peanut butter and jelly together. If the price of peanut butter increases, then the demand for jelly decreases. Market for Jelly Price D1 D2 Quantity Demand ed Week 3 Notes  Law of Supply: o The higher the price of a good, the greater will be the quantity supplied o This is a direct relationship o Change in QUANTITY SUPPLIED not SUPPLY What causes a change in SUPPLY? Everything EXCPET price of the product! 1. INPUT PRICES  What goes into creating the product? 2. TECHNOLOGY  What technology is used to create the product? 3. EXPECTATIONS 4. NUMBER OF SELLERS  Quantity Supplied: o The amount of a good that sellers are willing and able to sell o If a firm isn’t willing AND able, it is NOT part of the market


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