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Lecture

Oct.1st,2013.docx

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Department
Economics
Course
ECO1104
Professor
David Gray
Semester
Fall

Description
ECO1104 B Oct. 1 , 2013 YUJIE YI #7038840 THOSE OTHER FACTORS Consumer preferences  Become more favorable, demand shifts right - Scooters, roller blades, huge skateboards, tattoos, iPhones  Become less favorable, demand shifts left - Hula hoops, kids’bicycles, pork in light of the H1N1 virus, blackberries Price (and other) expectations - Don’t worry about this factor despite the fact that it appears in the textbook CRUCIAL POINT  The demand curve shows the relationship between P and Qd holding other factors, such as preferences, incomes, and prices of related goods constant.  If you are given a change in Price, which is the variable on the Y-axis, move ALONG the Demand curve  This means that if those other factors, which do not appear on either axis are not constant, there is a new demand relationship  If you are given a change in any of those other factors, SHIFT the Demand curve. - The direction depends on the particular case - The eleventh commandment: Do not shift a demand curve due to a change in price – EVER Three Points affect the Demand Curve: 1 /5 Consumer preference, Prices of related goods: substitutes and complements, Consumer incomes (must know whether it is a normal or inferior good) ILLUSTRATIONS  For each case, one has to determine two things - The market in question - The change, or event, that has occurred  The response has two parts - Does the demand curve shift, or does the one move along it - If the demand shifts, in which direction?  Consider the market for educational services. During the 1970s, it was possible to obtain a high paying job without a university degree. Nowadays, it is fairly rare. Relevance: - Given the improved career opportunities associated with a degree (Post- Secondary Education), PREFERENCES for higher education become more favorable in the 1990s, regardless of tuition. - Demand increases, or shifts to the right - At each possible price (tuition level), people are willing and able to buy more services than before. - There is a thus new relationship between P and Qd  Consider again the market for educational services. During the 1990s, tuition rates were greatly increased (except in Quebec) Relevance: - Enrollment will fall - Qd falls, and we move up and along the Demand curve. ECO1104 B Oct. 1 , 2013 YUJIE YI #7038840 - There is no shift because there is no change in tastes. Our inherent preferences for higher education do not depend on tuition. (The price of the good DOES NOT influence customers’tastes)  Consider the market for housing (sales, not rentals) in Ottawa- Carleton. 1999-2011 were very good years (except for 2009) Relevance: - Expansion in employment c
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