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Lecture

# ECON 1P91 Lecture Notes - Opportunity Cost, Kraft Dinner, Ceteris Paribus

Department
Economics
Course Code
ECON 1P91
Professor
Professor Cottrel

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Class #2 !!!Chapter 3 ! ! Sept. 15, 2011
Demand and Supply:
- Demand & Supply schedules, curves & graphs
- Determinants of Demand and Supply
- Changes in Quantity Demanded and Quantity Supplied
- Market Equilibrium
Relative Price:
-ratio of one price to another
- opportunity cost
Demand: Consumers
-consumers willing to purchase
-at various market prices
-at any given period of time
Demand Curve:
-Inverse relationship between Price and Quantity
-As Q^(up), marginal beneﬁt of extra unit falls, P(down)
Quantity Demanded:
-Amount / time
-Particular price
-Ceteris Paribus [all other things being equal]
Demand Curve:
-Downward sloping
-Inverse relationship between Price and Quantity
Equation of a Straight Line:
Y = mX + b
Demand Curve:
P = -2Q^d + 47 [ Inverse Demand ]
(Slope)(Intercept)
Also, Q6D = 23.5 - 0.5P
Market for Yoga Mats:
- Refer to Diagram 1
-Y-axis intercept:
-when Q = 0; P = 47
-X-axis intercept:
-when P = 0; Q = 23.5

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Law of Demand:
-Ceteris Paribus, the higher the price of a good, the smaller is the quantity demanded
Demand Downward Sloping:
-P(up) --> Q^d(down)
Change in Quantity Demanded:
- Movement along Demand Curve
- Results from a change in Prices
- Ceteris Paribus
- Refer to diagram 2
Shifts of Demand Curve:
-Demand Increases - entire curve shifts rightward
-Demand Decreases - entire curve shifts leftward
- Determinants of Demand cause shifts
Determinants of Demand:
1. Prices of Related Goods
-Substitutes - replacement goods
- Complements - goods used in conjunction with one another
Substitute Goods:
- Refer to diagram 3 & 4
-PB(up) --> Q^DB(down)
-Margarine demand goes up
-Butter:
- Price increases
- Quantity demanded decreases
-Margarine:
-Demand Increases
- Demand Curve shifts rightward
Complementary Goods:
- Refer to diagrams 5 & 6
-Syrup:
- Price increases
- Quantity demanded decreases
-Pancakes:
-Demand Decreases
- Demand Curve shifts leftward
2. Expected Future Prices:
-Future increases in prices
-buy now at cheaper prices
-Demand Increases now
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- Refer to Diagram 7
3. Income:
-Income Increases
- Buy more of Most goods
Normal Good:
-Income Increases, buy more
-Steaks
-Cars
- Refer to diagram 8
Inferior Good:
-Income Increases, buy less
-Hamburger
-Kraft Dinner
-Soup
- Refer to diagram 9
4. Population:
- Size
- Demand Increases
- Parking at Brock in September
-Age
- Demand Increases
- Double cohort - more students ﬁnishing high school at the same time, greater
demand for university places
- Refer to diagram 10
5. Preferences:
- Tastes or Attitudes
- Greater value
- Demand increases
- Refer to diagram 11
Market Demand:
-Horizontal summation of the individual demand curves
- Refer to diagram 12,13 & 14
-Given price add Qty
Supply: what ﬁrms
-Offer for sale
-At different prices
-At any given time period
Supply Curve:
-Direct relationship between Price and Quantity
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