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Econ 142 Chapter 3 notes: shift factors

by: Moriah Gerber

Econ 142 Chapter 3 notes: shift factors ECON 142

Marketplace > Kansas > Micro Economics > ECON 142 > Econ 142 Chapter 3 notes shift factors
Moriah Gerber
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These notes cover all the shift factors for both supply and demand, very important for our first test!
Dr. Brian Staihr
Class Notes




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This 3 page Class Notes was uploaded by Moriah Gerber on Thursday September 8, 2016. The Class Notes belongs to ECON 142 at Kansas taught by Dr. Brian Staihr in Fall 2016. Since its upload, it has received 20 views. For similar materials see Microeconomics in Micro Economics at Kansas.

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Date Created: 09/08/16
Wednesday, August 24, 2016 Chapter 3 Demand - Law of demand: at lower prices, larger quantity will be demanded. at higher prices, smaller quantity will be demanded • • as the price changes the quantity demanded will change • all else held equal (ceteris paribus) - A chance in price: a change in price causes a movement along the demand curve • this is a “change in the quantity demanded” • change in something else, like income, causes the entire curve to shift • thats a change in demand - Demand shift factor: 1. A change in income - for most goods, increase in income means an increase (shift right) in demand - “normal” goods - for a few goods, increase income means a decrease (shift left) in demand - “inferior” goods • Changes in income causes the demand curve to shift - for an individual - from the market 2. A change in the prices of related goods - a change in the price of one good, Good X, can cause a change in the demand for Good Y • Complements: Things we buy to go with another thing (Chips and salsa) • Substitutes: Things we buy instead of the other (A nook or a kindle, diet coke or a diet pepsi) - If A and B are substitutes, price of A goes up so demand for B shifts right 1 Wednesday, August 24, 2016 - If A and B are complements, price A goes up so demand for B shifts left 3. A change in tastes and/or preferences - Tastes change, something becomes more popular…shift right. Something becomes less popular…shift left. 4. A change in expectations (price) - Expect the price to be higher in the future, demand shifts right (increases) as you demand more today. - Expect the price to be lower in the future, demand shifts left (decreases) as you wait for that lower price 5. Changes in population and demographics - could also be considered “number of buyers” - as overall population increases, demand increases - as specific populations increase (examples: over 55, hispanic, etc.) demand for specific goods/services increases Supply - A change in price causes a movement along the supply curve…CHANGE IN QUANTITY SUPPLIED - A change in something else causes whole supply curve to shift…CHANGE IN SUPPLY 1. A change in technology - positive technology change causes curve to shift right new way of making something • a technological breakthrough • - negative change shifts it to the left 2. A change in the price of inputs - if the price of the input goes up, supply shifts left (decrease) 3. A change in expectations 2 Wednesday, August 24, 2016 - expectations affect supply the opposite way that they affect demand - with supply: if you think prices will go down in the future, you supply more today. 4. Change in the number of firms/sellers - An increase in the number of firms will increase the supply…shifting it to the right - A decrease in the number of sellers shifts the curve to the left 5. A change in the prices of other goods (substitutes in production) Both curves shifting - your income increases (normal good) and technology advances - price of a demand substitute increases and the price of an input increases - when both curves move, remember these things: • if they move in the same direction you will know quantity but you wont know price • if they move in opposite directions you will know price but you wont know quantity 3


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