ECO 1104 Lecture Notes - Lecture 7: Economic Equilibrium

• School: University of Ottawa
• Department: Economics
• Course: ECO 1104
• Professor: Lawrence Harris

Document Summary

Income effect: if price goes up, i no longer have enough money to buy the same amount of everything cut back. Substitution effect: if price goes up, maybe i can find cheaper items and stop buying the product whose price went up. Decreasing marginal utility: one more is not necessarily the same amount of satisfaction as the last one was (grandma and spaghetti bowls decreasing happiness) Inelastic vertical (quantity is not very responsive to price) Elastic horizontal (small price changes cause big change in quantity demanded) Straight diagonal line slope: p= mq + b (vertical intercept) Quantity supplied: the amount of a good that sellers are willing and able to sell. Law of supply: the claim that, other things equal, the quantity supplied of a good rises when the price of that good rises. Supply schedule: a table that shows the relationship between the price of a good and the quantity supplied.