Textbook Notes (363,559)
ECON 208 (107)
Chapter 3

# ECON 208 Chapter 3.docx

3 Pages
109 Views

School
McGill University
Department
Economics (Arts)
Course
ECON 208
Professor
Sebastien Forte
Semester
Summer

Description
 Functional relationships: represented in a verbal statement, in a numerical schedule/table, a mathematical equation, or in a graph  What is a function: one equation with one or two variables C=f(Y) C is consumption and Y is a household’s annual income. This expresses the dependence of consumption on annual income. This is said “C is a function of Y” Y would be exogenous and C would be the endogenous variable because we explain consumption using the data we have on Y.  If a graph is a straight line, it is a linear relationship, and if it is anything else (function, curve, scatterplot) it is a not linear relationship  Four linear relationships: A positive slope A negative slope Horizontal line- zero slope Vertical line- infinite slope  Slope= delta y/delta x  Equilibrium- when quantity demanded is equal to quantity supplied (no surplus/deficit)  Quantity demanded: the total amount that consumers desire to purchase in some time period  Quantity bough (or exchanged) refers to actual purchases  Quantity demanded in a flow, as opposed to a stock  Quantity demanded and the price are negatively related (law of demand)  Ceteris paribus- all other things constant  There are usually several products that can satisfy any given want or desire  A reduction in the price of a product means that the specific desire can now be satisfied more cheaply by buying more of that product  A change in variables other than price will shift the demand curve to a new position (ex. Price of broccoli goes up, the quantity demanded of carrots will go up because it is a substitute product- this would shift the whole demand curve for carrots outward because there is more quantity demanded at every price)  These changing variables can be things like: o Average household income (people have more to spend so quantity demanded goes up at every price) o Price of other products (if the price of the substitute becomes less expensive, you start buying the other good) o Distribution of income o Expectations about the future  A rightward shift indicates an increase in demand  A leftward shift indicated a decrease in demand  Think of quantity as the one where things actually happen- because quantity demanded changes based on price  SUPPLY  Quantity supplied is the amount of a product that firms desire to sell in some times period  Price of produ
More Less

Related notes for ECON 208

OR

Don't have an account?

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Join to view

OR

By registering, I agree to the Terms and Privacy Policies
Just a few more details

So we can recommend you notes for your school.