ECON 2101 Lecture Notes - Lecture 1: Price Floor, Inferior Good, Normal Good
Document Summary
Law of demand: f(x) = b-mx (b=quantity at x=0, m=slope, x=price) Quantity demanded is a function of price where both elements are inversely proportional. At higher prices, quantity demanded will be lower and vice versa. *as long as other factors remain constant. Price is the only factor that changes quantity demanded. Of the original product changes, the demand line. Quantity supplied is a function of price where both elements are directly proportional. At higher prices, producers will produce more and vice versa. Types of markets are taken into account here. Solve for x and plug in original equations to find quantity. When prices are higher than equilibrium, a surplus occurs. When prices are lower than equilibrium, a shortage occurs. There are multiple combinations of shifts in supply and demand. Some unknowns will occur where either price or quantity are unknown. To solve this, determine which variable changes the most.
