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01.14 - Supply and Demand.docx

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ECON 102
Lanny Zrill

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Supply and Demand 01-14-2013 Quantity Demanded  Amount of a good or service that consumers want to purchase  Not necessarily how much they are able to actually purchase What determines QD? o Product’s own price o Consumer’s income o Prices of other products o Tastes o Expectations about the future Law of Demand  Price and QD are negatively related holding all other factors constant (ceteris paribus)  Why is this the case? o The availability of close substitutes  Other examples: o Status goods (Conspicuous consumption) o Insulin o Cheap Shots in Hockey  A change in a variable other than a product’s own price will cause a shift in demand  Normal good – Qd increases when income increases  Inferior good – Qd decreased when income increases  Giffen good – Qd decreases when the product’s own price decreases (violates the law of demand)  Good Y is a substitute for Good X when demand for Goo
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