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Lecture 3

# ECN 104 Lecture Notes - Lecture 3: Economic Equilibrium, Shortage, Demand Curve

Department
Economics
Course Code
ECN 104
Professor
John Isbister
Lecture
3

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Demand Curve and Schedule
Demand curve is the graphical representation of the demand schedule. It shows how
much of a good or service consumers want to buy at any given price
Shift of the demand curve is a change in the quantity demanded at any given price,
represented by the change of the original demand curve to a new position, denoted by a
new demand curve
1. An “increase in demand” means a rightward shift of the demand curve: at any
given price, consumers demand a larger quantity than before.
2. A decrease in demand” means a leftward shift of the demand curve: at any
given price, consumers demand a smaller quantity than before
Cause for Shifts
Changes in the Prices of Related Goods
Substitutes: Two goods are substitutes if a fall in the price of one of the goods makes
consumers less willing to buy the other good.
Complements: Two goods are complements if a fall in the price of one good makes people
more willing to buy the other good.
Changes in Income
Normal Goods: When a rise in income increases the demand for a good — the normal
case — we say that the good is a normal good.
Inferior Goods: When a rise in income decreases the demand for a good, it is an inferior
good.
Changes in Tastes
Changes in Expectations
Changes in the Number of Consumers
A movement along the demand curve is a change in the quantity demanded of a good
that is the result of a change in that good’s price.
The market demand curve is the horizontal sum of the individual demand curves of all
consumers in that market.
“Law of Demand:” As price falls, quantity demanded rises.
If another factor influencing demand—other than its own price—changes, demand
changes, and we get an entirely new demand curve.

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Quanty supplied: 
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movement along the supply curve
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Changes in input prices
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Changes in the prices of related goods and services
Changes in weather
Changes in technology
Changes in expectaons
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Changes in the number of producers
The market supply curve is the horizontal sum
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