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Macroeconomics, Week 3, Chapter 4

by: Naya Rhodes

Macroeconomics, Week 3, Chapter 4 12906

Marketplace > Kent State University > Economics > 12906 > Macroeconomics Week 3 Chapter 4
Naya Rhodes
GPA 3.4

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About this Document

Exam next week, expect study guide soon. Exam will cover chapters 1, 2, 3, and 4.
Principles of Macroeconomics
Laurie Skul
Class Notes
Microeconomic, Macroeconomics, micro, Macro, Econ, Economics
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This 2 page Class Notes was uploaded by Naya Rhodes on Thursday September 15, 2016. The Class Notes belongs to 12906 at Kent State University taught by Laurie Skul in Fall 2016. Since its upload, it has received 3 views. For similar materials see Principles of Macroeconomics in Economics at Kent State University.


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Date Created: 09/15/16
Macroeconomics Chapter4:DemandandSupply -Demand: Demandscheduleshowsthequantitydemandedinthemarketatdifferentprices.Demandcurveshowstherelationship betweenthepriceandthequantitydemandedinagivenmarketonagraph.Thelawofdemandremindsusthatadecreasein priceresultsinanincreaseindemand.Demandistheamountthatpeopleareableandwillingtopurchaseagoodateach possiblepriceduringagivenperiodoftime.Demandistherelationshipbetweenpricesandquantities.Achangeindemand resultsinashiftinthedemandcurve.Quantitydemandedistheamountofaproductpeoplearewillingandabletopurchase ataspecificprice.Achangeinquantitydemandedresultsinmovementalongthedemandcurve. -Supply: Supplyscheduleshowsthequantitysuppliedatdifferentpricesinthemarket.Supplycurveshowstherelationshipbetween priceandquantitysuppliedonagraph.Thelawofsupplyremindsusthatanincreaseinpriceleadstoanincreasein quantitysupplied.Supplyistheamountofagoodorservicethatproducersarewillingandabletoofferforsaleatdifferent pricesduringaperiodoftime,withallotherfactorsconstant(ceterisparibus).Theamountsellersarewillingandableto offerforsaleduringaperiodoftimeataspecificpriceisthequantitysupplied,withallotherfactorsconstant. -Equilibrium: Thelocationwherethesupplyanddemandcurvesintersectgiveyoutheequilibriumpriceandquantity. Equilibrium quantitydemanded=quantitysupplied Thepricebelowtheequilibriumlevelresultsinexcessdemand/shortage,sincequantitydemandedishigherthanquantity supplied.Thepriceabovetheequilibriumlevelresultsinexcesssupply/surplus,sincethequantitysuppliedishigherthan thequantitydemanded.Priceispushedtowardsequilibriumlevelinbothcases. -Shiftsindemandcurve: -changesintastes -population -income(normal/inferiorgoods) -pricesofsubstitute/complementgoods -expectationsoffutureconditionsandprices -Shiftsinsupplycurve: -naturalconditions -inputprices -changesintechnology -governmenttaxes,regulations,orsubsidies -Shiftsinequilibriumpriceandquantity:Thereisafourstepprocesstotesthowaneventwillaffecttheequilibriumprice andquantity.First,createasketchofwhatthesupplyanddemandforthespecificmarketlookedlikepriortotheevent. Next,willtheeventaffectsupplyordemand?Now,istheeffectpositiveornegative?Drawtheappropriateshiftedcurve. Finally,comparethenewequilibriumpriceandquantitytotheoriginal. -Lawsthegovernmentenactstoregulatepricesareconsideredpricecontrols.Theycomeintwoways,priceceilingsand pricefloors. Priceceilingspreventpricesfromrisingaboveacertainlevel.Pricefloorspreventpricesfromfallingbelowacertainlevel. Pricefloorsandceilingsresultinunintendedconsequencesbecausebuyersandsellershavemanymarginsforaction. Marginsincludeblackmarkets,sidepayments,qualityadjustments,andshiftsinwhoisinvolvedintransactions.Thereare policyalternativesthatshiftsupplyanddemandthroughsubsidiesortaxes.Thesearepreferabletopoliciesthatattemptto setpricesbecausetheyavoidshortages,surpluses,andotherunintendedconsequences. -Thegapbetweenthepricethatconsumersarewillingtopayandthemarketequilibriumpriceistheconsumersurplus.The gapbetweenthepriceproducersarewillingtosellandthemarketequilibriumpriceistheproducersurplus. Socialsurplus=Consumersurplus+Producersurplus Deadweightlossisthelossthatoccursintotalsurpluswhentheeconomyproducesataninefficientquantity.


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