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Week 2 Notes, Chapter 3

by: Lauren Pike

Week 2 Notes, Chapter 3 Econ 1051

Lauren Pike
General Economics
George Chikhladze,Martha Steffens

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About this Document

This week of notes goes over Chapter 3: Demand, Supply and Market Equilibrium. Here you'll find detailed descriptions of important ideas such as the laws of supply and demand and how they influence...
General Economics
George Chikhladze,Martha Steffens
Class Notes
econ 1051, supply, demand, market equilibrium, law of supply, law of demand
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This 4 page Class Notes was uploaded by Lauren Pike on Friday September 4, 2015. The Class Notes belongs to Econ 1051 at University of Missouri - Columbia taught by George Chikhladze,Martha Steffens in Summer 2015. Since its upload, it has received 113 views. For similar materials see General Economics in Economcs at University of Missouri - Columbia.


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Date Created: 09/04/15
Ch3 Demand Supply and Market Equilibrium Demand schedulecurve that shows various amounts of a product that consumers will buy at each of a series of possible prices during a specific period c buyer s plansintentions w respect to a purchase of a product 0 law of demand as price falls the qty demanded rises and as price rises qty demanded falls inverse relationship 0 otherthingsequal assumption plays large role bc other factors besides price can be considered 0 demand curve curve illustrating inverse relationship between price of a product and qty demanded other things equal 0 determinants of demand factors other than price that locate the position of a demand curve also called demand shifters 0 basic determinants I consumer s taste of consumers in a market consumer s income prices of related goods expected prices 0 a change in any one of these determinants changes the demand 0 increase in demand means more ppl want to buy more items at each price decrease in demand means less ppl at each price 0 changes in demand 0 income I normal goods goodservice whose consumption rises when income increases and falls when income decreases I inferior goods goodservice whose consumption declines when income rises and rises when income declines 0 ex w more ppl can afford higher quality products so demand for lower quality products declines 0 prices of related goods increasesdecreases depending on demand I substitute good one that can be used in place of another good 0 when 2 products are substitutes an increase in price of one will increase demand for the other I complementary good one that is used together w another 0 if price of a complement increases the demand for related goods will decrease 0 expected prices I customers may buy more now in order to beat anticipated rise 0 changes in qty demanded movement from one point to another on a fixed demand curve cause is an increasedecrease in price of a product under consideration E 0 change in demand change in qty demanded of a product at every price shift in demand curve left or right 0 movement from points change in qty demanded o movement from Doto D1 or to D2 change in demand F39Hm Emilia par but Ittl39 154 A If39 l l tii LEquot in demand H 7 H lj n xi Emmi t T in demand In fit I r G E a It I Ilia Quantity imilllizum of battles p o demand has not changed it is the entire curve and it remains in a fixed place Supply schedulecurve that shows amounts of products that producers are willing to make available for sale at each of a series of possible prices during a specific period 0 supply curve shifts upward bc producers will offer more of a product for sale as its price rises and less of the product for sale as its price falls 0 law of supply as price increases qty supplied increases and as price decreases qty supplied falls 0 higher prices create profit incentive to produce and sell more of a product higher the price higher incentive and qty obtained costs will rise at some point obtain market supply by horizontally adding the supply curves on indiv consumers determinants of supply 0 resource prices I higher resource prices raise production costs and lower profits less suppw I lower resource prices reduce production costs and increase profits more suppw 0 tech I enables firms to produce units of output w fewer resources using fewer resources lowers prod cost and increases supply 0 taxes and subsidies I sales and property taxes are costs so increase in taxes raised prod costs and lowers supply I if gov subsidizes prod of a good lowers production cost and increase supply 0 subsidies opposite of taxes if more of a productservice is sold gov pays money to supplier 0 prices of other goods I substitution in prod when firms produce alternatives when prices change increasedecrease in supply of one product when alternatives are moreless expensive I in manufacturing firms predicted price increase may encourage more shifts of workers to produce more 0 of sellers I larger of suppliers means increased market supply 0 Changes in qty supplied movement from one point to another on a fixed supply curve E 0 Change in supply change in qty supplied of a product every price shift in supply curve 0 supply is a full schedule of prices and qtys shown and this doesn t change when price of an item changes Market Equilibrium o equil price price which intentions of buyers and sellers match qty demanded qty supplied demand and supply curves intersect o equil qty qty which intentions of buyers and seller match qty demandedqty supplied 0 surplus qty supplied gt qty demanded specific price 0 shortage qty demanded gt qty supplied specific price Changes in Suoply Demand and Equilibrium 0 changes in demand 0 increase in demand raises equil price and qty 0 decrease in demand lowers equil price and qty 0 changes in supply 0 increase in supply lowers equil price and raises equil qty 0 decrease in supply raises equil price and lowers equil qty 0 supply increases demand decreases I both changes decrease price I increase in supply gt decrease in demand equil qty will increase I decrease in demand gt increase in supply equil qty will decrease supply decreases demand increases I effect is increase in equil price I if decrease in supply gt increase in demand equil qty will decrease I if increase in demandgt decrease in supply equil qty will increase supply increases demand increases 0 O if increase in supply gt increase in demand equil price will decrease if increase in demand gt increase in supply equil price will increase increase in supply and demand both increase equil qty I if 2 changes are and cancel out price won t change 0 supply decreases demand decreases I if decrease in supply lt decrease in demand equil price will increase I if decrease in demand lt decrease in supply equil price will decrease I both reduce equil qty 0 Governmentset prices 0 if prices are unfairly high for buyerslow to sellers gov may place legal limits on how highlow price can go 0 price ceiling set max legal price a seller may charge for a goodservice I results in shortage 0 price floor min legal price a seller may charge for goodservice I at any price about equil price qty supplied will exceed qty demanded I surplus I gov will either restrict supply or purchase surplus subsidizing supplier and storedispose of it I disrupts rationing ability and distorts resource allocation Journalism Section 0 In the news 0 pork prices decrease 0 minimum wage causes job loss in Seattle 0 egg prices increase due to shortage 0 oil prices decrease 0 supply and demand dates back to 14th c w Islamic scholar lbn Taymiyyah


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