ECON 1115 Lecture Notes - Lecture 7: Demand Curve

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aquamarineraccoon967

2 Nov 2017

School

Northeastern University

Department

Economics

Course

ECON 1115

Professor

Peter J.Simon

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Document Summary

Recitation notes: the relationship between quantity demanded and price is an inverse relationship, quantity demanded goes down as price goes up, this can be due to diminishing marginal utility, the substitution effect, or income effect. Supply: the relationship between quantity supplied and price is direct, the price must go up to cover the costs of increased manufacturing. Determinants of demand (shift the demand curve): co(cid:374)su(cid:373)ers" tastes a(cid:374)d prefere(cid:374)ces, co(cid:374)su(cid:373)ers" i(cid:374)co(cid:373)es, the number of buyers in the market, the prices of related goods. Determinants of supply (shift the supply curve): cost of production (e. g. input prices, taxes, and subsidies, technology, number of sellers. If both curves in an equilibrium shift, it is not always clear where the equilibrium will land. If both curves shift out, then quantity will definitely increase, but price cannot be confirmed without knowing the amount of shift. The supply curve is shifted by: rent, wages, technology.

Related Questions

Entrance Slip Activity
1. Product prices give consumers and businesses a lot of information besides just the price. What kind of information?
Classroom Activities: Essential Questions
1. Describe the determinants of demand. Why are they important?
2. As the world population ages, will the demand for cholesterol drug increase, decrease, or remain the same? Assume there is a positive relationship between aging and cholesterol levels. Would this cause a change in demand or a change in quantity demanded?
3. Describe some of the reasons why supply changes. Improved technology typically results in lower prices for most products. Why do you think this is true? Describe the difference between a change in supply and a change in quantity supplied.
4. If a strong economic recovery boosts average income, what would happen to the equilibrium price and quantity for a normal good?
5. Suppose the market for tomatoes is in equilibrium, and events occur that simultaneously shift both the demand and supply curves to the right. Is it possible to determine how the equilibrium price and/or quantity would change?

1-Which variable is NOT a demand shifter?

Select one:

a. price of complements

b. price of substitutes

c. price of raw materials

d. tastes and preferences

2- What does the law of supply state?

Select one:

a. There is a positive relationship between price and quantity supplied.

b. There is a negative relationship between price and quantity supplied.

c. When prices rise, suppliers sell more.

d. When prices rise, buyers buy less of the product.

3- What can cause both equilibrium price and quantity to increase?

Select one:

a. an increase in the price of a complement good

b. a decrease in the population

c. consumer tastes becoming more favorable toward the good

d. an increase in the number of sellers

Section I: Supply & Demand Analysis (Chapter 3) In each of the following 10 questions, show what happens to the Demand, Supply, equilibrium price and equilibrium quantity of copper. Show an increase by use of +, a decrease with a -, and no change with 0 (thatâs a zero, not an O or o). Although in the real world, both supply and demand are constantly changing, in the model we are using here, only one curve shifts per problem. So, if demand goes + or -, supply will be 0, and vice versa. In no case will equilibrium price or equilibrium quantity be 0. You may want to sketch out the supply and demand curve analysis to help in answering the questions. You will also be required to identify which determinant (of demand or supply) has changed, thus causing the shift. Rather than actually writing in the determinant, fill in the blank with the number that corresponds to the relevant determinant, based upon the following list. You may want to refer to the lecture notes entitled Determinants of Demand & Supply in the COURSE CONTENTS section. For questions 1 - 10, refer back to this list. Some you may want to use more than once, some you won't use at all. Copy and paste this list to an MS Word document and then print it out if you don't want to keep scrolling back and forth between this list and the question you're trying to answer. Determinants of Demand: 1. Change in buyer tastes 2. Change in number of buyers 3. Change in income 4. Change in the prices of related goods (on the demand side) 5. Change in consumer expectations Determinants of Supply: 6. Change in resource prices 7. Change in technology 8. Changes in taxes and subsidies 9. Change in prices of related goods (on the supply side) 10. Change in producer expectations 11. Change in the number of suppliers. For example, if a rightward shift in the supply curve for an item were caused by an increase in the number of producers of that item, you would indicate this be entering 11 into the relevant blank. If the demand curve shifted to the left because people didn't like that item anymore (like mimeograph machines), you'd enter 1 into the blank. Q#1 President Trump signs into law a bill that says the U.S. government will subsidize the construction of new homes, office buildings, bridges, and other infrastructure projects requiring copper. Demand; Supply: Equilibrium Price: Equilibrium Quantity Exchanged; Which determinant changed?: Q#2 Non-capitalist economies around the world begin a phase of rapid economic development, construction and growth, becoming increasingly wealthy, as they begin to adopt more capitalist institutions, as in China, Russia, and the former communist countries of East Europe. Demand; Supply: Equilibrium Price: Equilibrium Quantity Exchanged: Which determinant changed?

ECON 1115 Lecture Notes - Lecture 7: Demand Curve

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