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Introduction to the Demand Curve

by Anu J
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ECON 1000
Kieran Furlong

Microeconomics (ECON 1000) DAY 3 – September 13 th Demand and Supply - The demand and supply relationship is fundamental in economics o Relationship between price and quantity also vital - Marshall defined o Short-term and long-term economics o Equilibriums / partial equilibrium systems  Market economies tend to reach an equilibrium - Equilibrium = the state od rest with no tendency to change given existing variable forces o Partial equilibrium analysis = analysis of the relationship between two variables while holding other variables constant (ceteris paribus means other things equal) and examining the effect of the other variables by systematically examining their variation - Atomism = the position that society (whole) is the sum of its parts (households and firms) o The whole is the sum of its parts (actually it’s not, hahaha!)  Total demand = the sum of individual demand (it’s not)  Total supply = the sum of individual supply (it’s not) o The whole is actually worth more than the sum of its parts  Total demand > the sum of the individual demands  Total supply > the sum of the individual supply Types of Economic Systems - Many types of economic systems: patriarchal, slave, feudal, socialist, communistic; we focus on the market system - Market system of economics = purchase and sale transactions between economic actors (households and firms) determine the allocation of resources in a market o One position on market economies: let people do whatever they want, and they will do good things, and they will be productive and everything would be good; they would automatically go to full employment and therefore full productivity o The price mechanism determines the allocation of resources in a market  Government affects resource allocation:  Government spending (roads, education, transfer payments, wars, etc.)  Taxation (income, sales, property taxes, etc.)  Public enterprises  Regulation  Monetary Policy o Competitive markets exist if you cannot influence the price of something  Competition = price taking *ON EXAM  Monopolies are bad o A monopolist is a price-maker, not a price-taker  Truly competitive market is where prices are all the same Microeconomics (ECON 1000)
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