COMM 295 Lecture Notes - Lecture 1: Demand Curve, Economic Equilibrium, Shortage
Document Summary
Managers use models to describe and predict the effects of their decisions. Good model makes predictions that can be verified (or falsified) empirically. Do not have to be realistic; realistic models would be too complicated to create and analyse. Predicts the results of the change of economic conditions on the price of a commodity. When excess demand and supply equals zero, supply equals demand. Law of demand: consumers demand more of a good if a price is lower, holding constant income, the prices of other goods, tastes, and other factors that influence the amount they want to consume. Changes in the quantity demanded in response to changes in price are movements along the demand curve. Changes in any relevant factor other than price causes a shift of the demand curve: substitutes emerge, change in price of substitutes/complements, benefit = demand shift to right, loss = demand shift to left. Government may interfere with markets to deal with economic/political issues.
