Popular in Microeconomics
Popular in Economcs
This 12 page Class Notes was uploaded by Megan Spees on Saturday September 19, 2015. The Class Notes belongs to ECON 110 - 04 at University of Indianapolis taught by Timothy E Zimmer in Fall 2015. Since its upload, it has received 30 views. For similar materials see Microeconomics in Economcs at University of Indianapolis.
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Date Created: 09/19/15
Week 3 of Microeconomics Week 3 Notes for Microeconomics Chapter 3 Where Prices come from Supply amp Demand Demand gt the amount of goodsservices society wants Supply gt the amount of goodsservices societyfirms wish to produce Law of Demand The lower the price the more you want the higher the price the less will be sold VE rMrmi CUI VV quotl r39 me W39 Price Events Change price higher or lower move along the demand curve The curve itself hasn39t changed but the quantity demanded has changed Week 3 of Microeconomics Change in demand is DIFFERENT change in demand curve shifts the curve Non Price Events Shifting the demand curve Price Events gt move along the curve curve not changed quantity demanded changes Non Price Events gt shifting of demand curve itself What are causes of non price events Income Normal goods any good for which the demand increases as income rises and decreases as income falls Income effect Change in quantity demanded of a good that results from the effect of a change in the good s price on consumers purchasing power Price of Related Goods Substitution Effect Change in quantity demanded of a good that results from a change in price making the good more or less expensive relative to other goods that are substitutes Inferior good a good for which the demand increases as income falls and decreases as income rises Substitutes goodsservices that can be used for the same thing Decrease in the price of substitutes causes demand curve to shift to the left increase in price causes curve to shift to the right Complements goodsservices used together Decrease in price of a complement causes the demand curve to shift to the right Increase n price of complement causes demand curve to shift to the left TastesPreferences Manipulates demand the most Most POWERFUL Week 3 of Microeconomics Usually when consumers taste for a product increases the demand curve will shift to the right and when consumers taste decreases the demand curve will shift to the left Population and Demographics Demographics Age race gender of population Population increases demand increases Age related changes huge Expected Future Prices Week 3 of Microeconomics SW Chara m B e mama CWM 1 m LuauHam CUHH S h G H MOTH j H CUrN S hdgk Q JMmmcS w gnu mariaM3 3 WLnomakqoa Y fh C01 WVv jpixg d mm D 2 WMCSW a mo 00000 9 uwa L quot94quot bu O onavu nova OWw 9 W hub WWF bu bltthVWMO buj van 0 NY Q w W Q m o W9 quot NL cowowwww 0 c a mo 03905 Iquot b 1 OM QMILUOWWWH od W0 amp Moe WWWhm V A mm umMrwtI 7 9N01H4 O39Ha39 W9 Cweck ijM Q 9N quotW r 0 aw W0 pmccr Scare 9quot D quot 0M0hm 1 Week 3 of Microeconomics Chmnasl m D CYYCV C Vlt Chm red W QUKUN 9741 Dam mcp Week 3 of Microeconomics Supply Mirror image of demand Law of Supply Lower the price less firms want to produce Higher the price more is supplied Inverse of demand curve Upward slope Price Events Change Quantity Supplied Non Price Supply Shifts Price of Inputs increases Supply decreases Technological gain increases supply increases Number of firms increases supply increases Expected Prices Supply shocks Positive causes increase in supply negative causes decrease in supply quQlV W 9 Sup pk Sczvxadmc S i r h 6 3 Clxm n Yb qu L 39 300 8 300 9 3 390 I amp30 90 D 0 02w l5 0 a 0 2 639 8 lomqu rrw WQ MH Qng cuer YN c 3 Sx WM e 7 j I s I u Week 3 of Microeconomics Week 3 of Microeconomics WWW WW3 Vs WW m QuomhM WW Week 3 of Microeconomics Market Equilibrium Supply equals demand this is stable and self regulated Adam Smiths invisible hand at work in 1 ill Art w I ha WP 39Lppl v3 Surplus vs Shortage Surplus Quantity Supplied is greater than Quantity Demanded A surplus causes the price to gradually become lower until it gets back to market equilibrium or the company will go out of business Shonage Quantity Supplied is less than Quantity Demanded Week 3 of Microeconomics g gumle nl39 j quot l quotI k3 quot I y 39 I IHY quotJ quot A39 I r n ouv quotnullg CA Iquot r 9 m an n w R 3 0 L39 i 1O Week 3 of Microeconomics Firm leaving the market Supply curve shift to the left equilibrium price will rise and quantity will fall Firm entering the market Shift to the left 11 VWNM Doweng m SJQOW Erm WWh Vg WIUquot H7an 2 ma 2 2 QJQWHYL brl WM nwm m WWC W W 39IL quotA qk at uquot quotA CLH quotv h A CDL WM f q N 011mg 12 Week 3 of Microeconomics