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This 1 page Class Notes was uploaded by Charles Smith on Monday September 19, 2016. The Class Notes belongs to ECON 200 at James Madison University taught by in Fall 2016. Since its upload, it has received 9 views. For similar materials see Introduction to Macroeconomics in Economics at James Madison University.
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Date Created: 09/19/16
ECON WEEK 3 Notes: Demand What makes someone buy something? Demand represents the behavior of the buyers. A demand curve shows the quantity demanded at different prices. Price and Quantity are negatively related. The higher the price the less the quantity, the lower the price the higher the quantity. When this is applied to a chart, there are two ways to read it. Horizontally How much of a product buyers are willing to purchase the product at a certain price. Vertically Highest price buyers are willing to spend. Supply How much of something is available for purchase? A Supply Curve shows the quantity supplied at different prices. A Shortage is caused when prices are too low. A Surplus is caused when prices are too high. The Supply curve curves up because the cost of producing a good is not equal across all suppliers. Like the Demand chart, there are two ways to read the spply chart. Vertically How high can I sell this product for and still make profit without surplus? Horizontally How much are buyers willing to consume at a price? Producer surplus is when the producer has more product than they have outlets to sell it from, either because of limited number or an unstable price line. The price line is the logical limit of maximum price a producer can sell for without running into a surplus or shortage. Surpluses and shortages are both bad for producers when they occur without planning. Producers gain from exchange. The difference between market price and the lower (minimum) price line is the profit margin. Changes in supply cause an intense change in the market. When the price line of the production for the new supply is lower, it is cheaper to produce. Therefore, it would benefit the market to increase supply and/or lower price. If the Price line of production is higher for the new supply, then it is more expensive to produce. Therefore, the market would benefit, from decreasing the supply and/or increasing the price.
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