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Econ 201 Lecture 4 Notes

by: Samantha Shea

Econ 201 Lecture 4 Notes ECON 201

Samantha Shea

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These notes cover what was talked about in class on Wednesday, September 14th.
Micro Economics
Professor Liedholm
Class Notes
Microeconomic, Lecture Notes, supply
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This 3 page Class Notes was uploaded by Samantha Shea on Wednesday September 14, 2016. The Class Notes belongs to ECON 201 at Michigan State University taught by Professor Liedholm in Fall 2016. Since its upload, it has received 4 views. For similar materials see Micro Economics in Microeconomics at Michigan State University.

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Date Created: 09/14/16
Lecture  4  Notes  9/14/16 Wednesday,  September   14, 12:43  PM • For  next  time: ○ Read:  Chapter  5 ○ Problem  Set  #1  will  be  available  by  Wednesday • Review ○ When  the  price  changes,  change  in  quantity  demanded  which  is  a   movement  along  the  line  =  change  in  quantity  demanded ○ Change  in  demand  by  taste,  income,  and  price  of  other  product  is  a   shift ○ An  increase  in  the  price  of  Lemon  Lime  will  decrease  the  quantity   demanded  of  that  product. Supply • Amount  of  the  good  that w  illingand  able to  sell • Factors  that  affect  quantity  supplied ○ Resource  price ○ Technology   ○ Price  of  product • Supply  curve ○ a  graph  of  the  relationship  between  the  price  of  a  good  and  the  quantity   supplied ○ Price  goes  up  =  increase  in  quantity  supplied • Change  in quantity  supplied is  a  movement  along  the  curve • Law  of  supply-­‐quantity  supplied  of  a  good  rises  when  the  price  of  the  good  rises ○ Direct  relationship  between  price  and  quantity  supplied • Change  in  Supply ○ Resource  price   § When  costs  of  the  price  rises,  the  quantity  supplied  decreases  and   the  supply  curve  is  shifted  to  the  left ○ Technology ○ Shifts • Price  determination  in  markets ○ The  market  demand  curves  shows  the  amount  demanded  at  every  price ○ The  market  supply  curve  shows  the  amount  supplied  at  every  price the  supply  curve  is  shifted  to  the  left ○ Technology ○ Shifts • Price  determination  in  markets ○ The  market  demand  curves  shows  the  amount  demanded  at  every  price ○ The  market  supply  curve  shows  the  amount  supplied  at  every  price ○ The  question  now  is  whether  there  is  some  price  at  which  the  quantities   supplied  and  demanded  are  the  same • Equilibrium  price ○ A  price  at  which  quantity  supplied  equals  quantity  demanded ○ At  the  equilibrium  price  there  is  no  net  tendency  for  price  to  change • Excess  supp-­‐a  situation  in  which  quantity  supplied  is  greater  than  quantity   demanded ○ Lower  the  price • Excess  demand-­‐a  situation  in  which  quantity  demanded  is  greater  than  quantity   supplied ○ when  there  is  excess  demand  for  a  good,  price  will  tend  to  rise ○ Ex.  If  the  quantity  demand  exceeds  the  quantity  supplied  of  Lemon  Lime,   then  there  is  a  shortage  and  its  price  will  rise • Economists  are  interested  in  the  equilibrium  price • Demand  for  snickers  bars  2016  Econ  201 $/Bar D DW M S T All  (Demand) Supply .25 8 4 15 8 4 39 39 .20 15 8 20 10 5 58 39 .15 25 12 30 15 6 88 39 .10 80 16 45 20 8 169 39 .05 100 20 50 30 10 210 39 ○ Equilibrium  price  would  be  $0.25 ○ How  can  the  price  of  Snicker  Bars  change? § Only  if  there  is  a  change  in  supply,  or  if  there  is  a  change  in  demand • Changes  in  demand  can  be  caused  by: ○ Changes  in  consumer  incomes ○ Changes  in  prices  of  substitutes ○ Changes  in  prices  of  complements ○ Changes  in  tastes • Change  in  supply  can  be  caused  by: ○ Changes  in  prices  of  inputs ○ Changes  in  technology • Demand  shift-­‐direct  relationship  between  shift  direction  and  price • Supply  shift-­‐inverse  relationship  between  supply  shift  and  price • Change  in  supply  can  be  caused  by: ○ Changes  in  prices  of  inputs ○ Changes  in  technology • Demand  shift-­‐direct  relationship  between  shift  direction  and  price • Supply  shift-­‐inverse  relationship  between  supply  shift  and  price


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