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Lecture

lecture 4

5 Pages
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Department
Economics
Course Code
ECO100Y1
Professor
Jack Carr

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Demand Supply and Market Price
Competitive Market
Many buyers and sellers each of whom has no influence on market price
Example:coffee
Law of Downward Sloping Demand
Other things equal the higher is the price of the good, the lower is the quantity demanded
Candy Bar
Price Quantity Demanded
5 0
4 3
3 6
2 9
Individual demand curve (Jane)
Market demand curve: sum of individual demand curves (at each possible price, sum the
quantities demanded by each individual)
1. A change in quantity demanded (as the price of the good changes) is a movement
along the demand curve
2. A change in demand (for a given price) is a shift in the demand curve
3. Sources of shifts in demand curves
a.Prices of related goods
i.Substitutes
ii.Complements
b. Income
c.Preferences
Substitutesinstead of”
Example: tea and coffee
Complements together”
Example:coffee and cream
ECO20100927
www.notesolution.com
Shift in Demand Curve for Ice Cream Cones
1. Unusually hot summer
2. Sharp drop in price of yogurt cones (substitute)
SUPPLY CURVE
1. Law of Upward-Sloping Supply
Other things equal, the higher is the price of a good, the higher is the quantity
supplied
Source: firms seeking to maximize profits
2. Market Supply Curve: Sum of Firm Supply Curves (Assumes there is a large number
of firms each of which can exert no influence on price.)
MOVEMENT ALONG A SUPPLY CURVE VERSUS A SHIFT IN THE SUPPLY
CURVE
A change in quantity supplied (as the price of the good changes) is a movement along the
ECO20100927
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Description
Demand Supply and Market Price Competitive Market Many buyers and sellers each of whom has no influence on market price Example: coffee Law of Downward Sloping Demand Other things equal the higher is the price of the good, the lower is the quantity demanded Candy Bar Price Quantity Demanded 5 0 4 3 3 6 2 9 Individual demand curve (Jane) Market demand curve: sum of individual demand curves (at each possible price, sum the quantities demanded by each individual) 1. A change in quantity demanded (as the price of the good changes) is a movement along the demand curve 2. A change in demand (for a given price) is a shift in the demand curve 3. Sources of shifts in demand curves a. Prices of related goods i. Substitutes ii. Complements b. Income c. Preferences Substitutes instead of Example: tea and coffee Complements together Example: coffee and cream ECO20100927 www.notesolution.com
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