ECO-2023 Lecture Notes - Lecture 6: Economic Equilibrium, Excess Supply, Shortage
Document Summary
Law of demand: there is an inverse (negative) relationship between the price of a good and the quantity that buyers are willing to purchase. Results in a downward sloping demand curve. The height of the demand curve at any quantity shows the maximum price that consumers are willing to pay for that additional unit, in other words it is their marginal benefit. *notice that when consumers have more of the good they value it less* Consumer surplus: the difference between the maximum amount consumers would be willing to pay and the amount that they actually pay. Consumer surplus is the area below the demand curve but above the price. Change in quantity demanded: a movement along the curve. Caused by: a change in the price of that ood. Increase in quantity demanded: movement down the curve (right) Decrease in quantity demanded: movement up the curve (left) Change in demand: a shift of the curve.
