ECO 301 Lecture Notes - Lecture 7: Exxonmobil, Demand Curve, Excess Supply

• School: Miami University
• Department: Economics
• Course: ECO 301
• Professor: vitafaychuk

Document Summary

Wealth total resources owned by the individual, including all assets. Expected return the return expected over the next period on one asset relative to alternative assets. Risk degree of uncertainty associated with the return on one asset relative to alternative assets. Liquidity ease and speed with which an asset can be turned into cash relative to alternative assets. Framework 1: supply and demand in bond market. Demand: created by those who desire to purchase (invest in) bonds, lower price and high returns desired, lower prices higher interest rates quantity demanded is higher (neg. correlation) because expected return is higher. Excess supply bond prices decrease to equilibrium. Excess demand bond prices increase to equilibrium. Occurs when the amount of people that are willing to buy (demand) equals the amount of people willing to sell (supply) at given times. Demand = supply equilibrium (market clearing price) and (i) interest rate. Demand > supply excess demand price increase, interest rate decrease.