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Lecture 5

ECON 1000 Lecture Notes - Lecture 5: Economic Equilibrium, Peanut Butter, Demand Curve

Department
Economics
Course Code
ECON 1000
Professor
Lecture
5

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The Demand Curve
The quantity demanded – the amount of a good that buyers are willing and able to
purchase
Law of Demand – the claim that, order things equal, the quantity demanded of a good
falls when the price of the good rises
Demand schedule – a table that shows the relationship between the price of a good and
the quantity demanded
Demand curve – a graph of the relationship between the price of a good and the quantity
demanded
Demand Curve Shifters
Shifts in demand curve shows how price affects quantity demanded.
An increase in demand – any change that increases the quantity demanded at every
price (shifts demand curve to the right)
A decrease in demand – any change that reduces the quantity demanded at every price
(shifts demand curve to the left)
Changes in Income
Normal goods: when income rises, demand increases
Inferior goods: when income rises, demand decreases
Prices of related goods
Substitutes: two goods for which an increase in price of one leads to an increase
in the demand for the other. (Eg. Hot dogs and hamburgers, movie tickets and
DVD rentals)
Complements: two goods for which an increase in the price of one leads to a
decrease in the demand of the other. (Eg. Peanut butter and jelly, cars and
gasoline)
As the number of buyers increase demand will rise.
The Supply Curve
The quantity supplied – the amount of a good hat sellers are willing and able to sell.
Quantity supplied rises as the price rises
Quantity supplied falls as the price falls
Law of Supply – the claim that, other things equal, the quantity supplied of a good rises
when the price of the good rises.