ECON 1 Lecture Notes - Lecture 3: Cream Cheese, Demand Curve, Bacon

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26 May 2018
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#3 Tuesday 1/23 (Ch.4 Demand and Supply)
Demand
The quantity demanded of any good is the amount of the good that buyers are willing to purchase
Law of demand: the quantity demanded of a good falls when the price of the good rises, other things
equal
Example: Helen’s Demand for Lattes
Demand Curve Shifters
The demand curve shows how price affects quantity demanded, other things being equal
These “other things” determine buyers’ demand (other than price)
Income
Price of other goods
Tastes
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Demand Shifters: Income
Demand Shifters: Complements
Two goods are complements if an increase in the price of one causes a fall in demand for the other.
Examples:
Computers and software
Bagels and cream cheese
Eggs and bacon
Music downloads and iPads
Example: Music Downloads and iPad
A fall in price of iPad shifts increases the
demand for music downloads
Demand Shifters: Substitutes
Two goods are substitutes if an increase in the price of one causes an increase in demand for the
other.
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Examples
Pizza and hamburgers
Coke and Pepsi
Laptops and desktop computers
CDs and music downloads
Question
Consider music downloads. What happens to the demand curve for music downloads when the price of CDs
falls?
a. It shifted to the right
b. It did not move
c. It shifted to the left
d. We can’t tell
Music Downloads and CDs
They are substitutes → demand for music downloads shifts to the left
Demand Shifters: Tastes
If tastes shift toward
a good
Demand for that good increases
D
curve moves to the right.
Question
In the 90’s, a low carb diet called Atkins diet became suddenly popular. What happened to the demand curve
for bread?
a. It shifted to the right
b. It did not move
c. It shifted to the left
d. We can’t tell
Supply of Lattes
The supply curve is upward-sloping because when the price
goes up, the suppliers are willing to supply more
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Document Summary

The quantity demanded of any good is the amount of the good that buyers are willing to purchase. Law of demand: the quantity demanded of a good falls when the price of the good rises, other things equal. The demand curve shows how price affects quantity demanded, other things being equal. These other things determine buyers" demand (other than price) Two goods are complements if an increase in the price of one causes a fall in demand for the other. A fall in price of ipad shifts increases the demand for music downloads. Two goods are substitutes if an increase in the price of one causes an increase in demand for the other. What happens to the demand curve for music downloads when the price of cds falls? a. b. c: we can"t tell. They are substitutes demand for music downloads shifts to the left. In the 90"s, a low carb diet called atkins diet became suddenly popular.

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