ECON 1B03 Lecture Notes - Fall 2018 Lecture 3 - Economic equilibrium, Nutella, Normal good

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ECON 1B03 Lecture 2: Mcmaster University Econ 1B03 ch1 & 2 notes

ECON 1B03 Lecture Notes - Fall 2018 Lecture 3 - Economic equilibrium, Nutella, Normal good

ECON 1B03 Lecture Notes - Lecture 4: Opportunity Cost, Comparative Advantage, Economic Equilibrium

Econ 1B03 Lecture 3 Demand, Supply, Equilibrium

September 19, 2018

Next Class:

Test#1 (chapter 1-3) review will be conducted by TAs

70 minutes FOR 35 Multiple Choice questions.

Chapter 3: Demand, Supply, Equilibrium

Overview:

-Demand

Change in demand -> shift in demand curve

Change in quantity demand -> movement along the demand curve

Shift factors of demand -> eg. Income, taste, expectation…

-Supply

Change in supply-> shift in supply curve

Change in quantity supply-> movement along the supply curve

Shift factors of supply-> eg. Cost of inputs…

-Market Equilibrium

Market clearing, at market equilibrium, Qs = Qd

-Shift variables cause demand & supply curve move

Summarize from questions:

1. The differences between an increase in demand and an increase in quantity

demand:

The increase in demand is shift of the curve and an increase in quantity demand is a

movement along the curve.

① Changing in shift factors -> shift demand curve -> changes in demand

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Example:

Change in income, price change in related goods, such as substitutes goods (apples

and pears) and complements goods (Ketchup and hotdog), change in expectation,

taste ( such as policy) and so on.

② Change in price level -> movement along the demand curve -> change in quantity

demand

2. Shift factors of Expectation:

If you expect the price of good A will increase tomorrow, your demand for good A will

increase now, because the price of good A is cheaper now.

For expectations, we do not consider the demand for tomorrow

3. Surplus & shortage

Surplus : When market price is above the equilibrium price, Qs > Qd

Shortage: When market price is below the equilibrium price, Qs < Qd

To find if there is a surplus or shortage:

Price

Quantity

Change in demand

Price

Quantity

Change in quantity demand

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Document Summary

Test#1 (chapter 1-3) review will be conducted by tas. Change in demand -> shift in demand curve. Change in quantity demand -> movement along the demand curve. Shift factors of demand -> eg. income, taste, expectation . Change in quantity supply-> movement along the supply curve. Shift factors of supply-> eg. cost of inputs . Market clearing, at market equilibrium, qs = qd. Shift variables cause demand & supply curve move. Summarize from questions: the differences between an increase in demand and an increase in quantity demand: The increase in demand is shift of the curve and an increase in quantity demand is a movement along the curve. (cid:6917) changing in shift factors -> shift demand curve -> changes in demand. Change in income, price change in related goods, such as substitutes goods (apples and pears) and complements goods (ketchup and hotdog), change in expectation, taste ( such as policy) and so on.

Related Questions

1.What is the difference between a movement along and shift of the demand curve?

1a.Discuss the impact on the equilibrium price and quantity that results from; (1) an increase in demand, (2) an increase in supply, (3) an increase in both supply and demand.

1b.Give an example of the role of supply and demand in decision-making

1. In a competitive market, the quantity of a product produced and the price of the product are determined by

a. buyers.

b. sellers.

c. both buyers and sellers.

d. None of the above is correct.

2. Which of the following statements is correct?

a. Buyers determine supply and sellers determine demand.

b. Buyers determine demand and sellers determine supply.

c. Buyers determine both demand and supply

d. Sellers determine both demand and supply

3. The demand for a good or service is determined by

a. those who buy the good or service

b. the government.

c. those who sell the good or service.

d. both those who buy and those who sell the good or service.

4. An increase in supply is represented by

a. a movement downward and to the left along a supply curve.

b. a movement upward and to the right along a supply curve.

c. a rightward shift of a supply curve.

d. a leftward shift of a supply curve

ceruleanseal203

1. A change in quantity supplied:

A. refers to a shift in the supply curve.

B. results from a change in a determinant of supply.

C. refers to a movement along a given supply curve.

D. is caused by a change in the number of sellers in the industry.

2. Which one of the following would most likely cause the supply curve for microwaves to shift to the right:

A. a decrease in the price of microwaves.

B. an increase in the wage rate earned by workers who produce microwaves.

C. a decrease in consumer preferences for microwaves.

D. an increase in the number of firms that produce microwaves

3. If the actual price sellers are pricing their goods at is currently above the equilibrium price. There is a ____________. Therefore, we would expect sellers to ____________ the price until the market reaches equilibrium.

surplus; raise

surplus; lower

shortage; raise

D. shortage; lower

4. Suppose the demand and the supply of wine both increase. The net effect of these changes in demand and supply will be

A	an increase in equilibrium quantity, but a decrease in equilibrium price.
B	an increase in equilibrium price and quantity.
C.	an increase in equilibrium price, but the change in equilibrium quantity is indeterminate.
D.	an increase in equilibrium quantity, but the change in equilibrium price is indeterminate.

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ECON 1B03 Lecture Notes - Fall 2018 Lecture 3 - Economic equilibrium, Nutella, Normal good

ECON 1B03 Lecture 2: Mcmaster University Econ 1B03 ch1 & 2 notes

ECON 1B03 Lecture Notes - Fall 2018 Lecture 3 - Economic equilibrium, Nutella, Normal good

ECON 1B03 Lecture Notes - Lecture 4: Opportunity Cost, Comparative Advantage, Economic Equilibrium

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