FARE 1300 Lecture Notes - Lecture 7: Demand Curve

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peachcicada791

24 Nov 2017

School

University of Guelph

Department

Food, Agricultural and Resource Economics

Course

FARE 1300

Professor

Julio Mendoza

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Document Summary

A car and gasoline e. g an ipad vs a playbook. Demand curve: for an individual or group of individuals. Change in demand is when something other than the price of something changes like: preferences, expectations and perceptions. If you get a lot of money the demand curve is going to shift to the right. If another company makes a better version, the demand curve will shift to the left. Quantity demanded: how much will be purchased at a specific price. Change in demand: a shift in the relationship because income or some other price has changed. Change in quantity of demanded: the different between how much will be purchased at one price compared to another price (own price) Demand curves have a negative slope with respect to own price. As price falls for one good, people will purchase more of it and less of its substitutes. Elasticity: measures the responsiveness to price as a pure number.

Related Questions

Consider the supply and demand for cell phones. The market demand for cars is given by Q_D = 7000-30P and supply is given by Q_S = 1000

a) Find the equilibrium price and quantity.

Suppose that consumers change their expectations and believe their future income will be lower. This causes the demand curve to shift to Q_D=6500-30P

b) If prices are sticky, does this shock lead to a surplus or a shortage? By how much?

c) If prices are flexible, does this shock lead to inflation or deflation? By how much?

Consider the supply and demand for cell phones. The market demand for cars is given by Q_D = 7000-30P and supply is given by Q_S = 1000

a) Find the equilibrium price and quantity.

Suppose that consumers change their expectations and believe their future income will be lower. This causes the demand curve to shift to Q_D=6500-30P

b) If prices are sticky, does this shock lead to a surplus or a shortage? By how much?

c) If prices are flexible, does this shock lead to inflation or deflation? By how much?

Demand curve:

The demand curve is the graph depicting the relationship between the price of a certain commodity and the amount of it that consumers are willing and able to purchase at any given price. It is a graphic representation of a market demand schedule. The demand curve for all consumers together follows from the demand curve of every individual consumer: the individual demands at each price are added together, assuming independent decision-making. Demand curves are used to estimate behaviors in a competitive market and are often combined with supply curves to estimates the equilibrium price. Demand curves are usually considered as theoretical structures that are expected to exist in the real world, but real-world measurements of actual demand curves are difficult and rare.

The demand curve will move downward from the left to the right, which expresses the law of demand.

If the price of corn rises, consumers will have an incentive to buy less corn and substitute other foods, so the total quantity of corn consumers’ demand will fall. The degree to which rising price translates into falling demand is called demand elasticity or price elasticity of demand. If a factor besides price or quantity changes, a new demand curve needs to be drawn. For example, say that the population of an area explodes, increasing the number of mouths to feed. In this scenario, more corn will be demanded even if the price remains the same, meaning that the curve itself shifts to the right.

According to my view, the demand curve for the Apple Video iPod will increase. According to the given paragraph iPod is thinner and lighter. The hardware and software ecosystem offers good content options and also portable. These are the main qualities expected by the customers. Henceforth customer wants to buy this product in the future also. If the price of the product increases in the future the demand for the product also increases because customers demand more products thinking of price increase in the future. At the same time if the price decreases in this case also customers will buy the product because they think that the good product is coming at a reasonable price. The demand curve for Apple Video iPod in the future may be like follows.

What is your opinion on a competitor product which has similar features to that of an i-pad or say it is better than i-pad and is offered at a comparatively cheaper price, how this will affect the i-pad demand curve and why?

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FARE 1300 Lecture Notes - Lecture 7: Demand Curve

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