ECO 105 Goel Week 3 Notes: 8/31-9/4
ECO 105 Goel Week 3 Notes: 8/31-9/4 ECO 105
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This 4 page Class Notes was uploaded by Daniel Hemenway on Monday September 7, 2015. The Class Notes belongs to ECO 105 at Illinois State University taught by Rajeev Goel in Fall 2015. Since its upload, it has received 62 views. For similar materials see Principles Economics in Economcs at Illinois State University.
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Date Created: 09/07/15
ECO 105 Goel 83184 Slight Importance Moderate Importance High Importance 0 Demand Demand The amount people are prepared to buy under specified circumstances during a specified time period Law of Demand There is a negative inverse relationship between the price of a good and its Quantity Demanded Holding other factors constant Demand Curve Shows the various Quantities Demanded at different prices Holding other factors constant Real world behavior is not necessarily a straight line Example D1 SUnit P D1 D O QUnits A negative price and negative quantity don t have economic meaning 0 Individual and Market Demand The Market Demand curve is the Horizontal Sumadding CD of Individual Demand Individual Market Market Demand SMeal SMeal SMeal B 5 5 quotquotquotquotquotquotquotquot quot 5 3 3 quotquotquotquotquotquotquotquotquotquotquotquotquotquot 3 DA DB 2 3 Q 3 4 Q 5 7 Q quot Week quot Week Week ECO 105 Goel 83184 0 Individual and Market Demand cont Principle of Substitution Lady every good or service has a substitute 0 Example Coke and Pepsi Air and Car Travel 0 Movement vs Shift in a Curve Applies to both demand and supply curve When the Price of the Good Changes there is a Movement along the Demand or Supply curve Called Change in Quantity DemandedSupplied When Factors Other Than the Price of the good change there is a shift in the Demand or Supply curve Called Change in DemandSupply Movement Shift o DDU o D o D o D ECO 105 Goel 83184 Factors that Shift the Demand Curve other than price Price of Related Goods Substitutes or Complements Substitutes example Coke and Pepsi Complements example Sugar and Coffee Consumer Income Normal and Inferior Goods Most goods are normal goods Income increases Demand increases Inferior goods Income increases Demand decreases Example Ramen Noodles Consumer Preferences Number of Buyers Buyers Expectations Supply Supply Quantity Supplied of a good or service is the amount of the good or service offered for sale at a given price Holding other Factors Constant The Supply Curve or supply schedule Of a particular good or service shows the various Quantities Supplied at different prices Holding other Factors Constant The Supply Curve is generally positively sloped Factors Shifting the Supply Curve Prices of Other Goods Other goods the seller is either producing or can produce Prices of Relevant Resources Technology Number of Sellers Seller s Expectations ECO 105 Goel 83184 Market Equilibrium Market Equilibrium Is at the the intersection of Demand and Supply Curves Gives Equilibrium price and quantity Equilibrium price is that price at which the Quantity Demanded of a good equals it Quantity Supply Surplus Shortage 0 E0 Q Characteristics Quantity Demanded Quantity Supplied No shortage or surplus The market clears Equilibrium price is stable No tendency to rise or fall 0 Effect on Market EQ of an increase in income P 1 Q ll 0 Effect of increase in technology P U Q 1 0 Effect on Market EQ of an increase in the number sellers and a simultaneous decrease in the number of buyers P U Q depends on amount
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