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ECON 230D1 Chapter Notes - Chapter 2: Invisible Hand, Economic Equilibrium, Root Mean Square

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rosebadger775
14 Dec 2017
School
McGill University
Department
Economics
Course
ECON 230D1
Professor
Ling Ling Zhang

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Document Summary

A demand curve is a graph which shows the relationship between quantity demanded and price levels. (they can be smooth or wavy. ) The e ect of price on the quantity demanded: the law of demand states that consumers demand more old a good as prices generally decrease. , holding all other factors equal. The e ect of other factors on demand: a change in any other factor other than the price of the curve will result in a shift of the demand curve. A change in the price of complement and substitute goods can cause such a shift in the demand curve. (i. e. for co ee, if the price of sugar increases, then the demand curve for co ee will shift to the left. Increase in price of tea will shift demand curve to the right. : a change in price results in movement along the curve. A change in any other factor results in a shift of the curve.

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Related Questions

Which of the following is true regarding the​ price-demand relationship?

1. Other factors affecting demand remaining constant, if the price of a good increases its quantity demanded will fall.

2. Change in the price of the good can alone shift its demand curve.

The substitution effect of a price change refers to
A) the change in quantity demanded that results from a change in price making a good more
or less expensive relative to other goods that are substitutes.
B) the shift of a demand curve when the price of a substitute good changes.
C) the movement along the demand curve due to a change in purchasing power brought
about by the price change.
D) the shift in the demand curve due to a change in purchasing power brought about by the
price change.

ts) The demand for organic carrots is given by the following

equation:QDO = 75-5PO+PC+2I

where PO is the price of organic carrots,PC is the price of conventional carrots, and I is the average consumer income. Notice how this isn't a standard demand curve that just relates the quantity of organic carrots demanded to the price of organic carrots. This demand function also describes how other factors a ect demand namely, the price of another good (conventional carrots) and income

b) Using the demand curve drawn in (a), what is the quantity demanded of organic carrots when PO= 10?

c) Using the demand curve drawn in (a), what is the quantity demanded of organic carrots when PO= 5?

d) Now, suppose PO= 10 and PC= 15 (I remains at 10). What is the quantity demanded of organic carrots? Compared with your answer in (b), has there been a change in demand or quantity demanded? Demonstrate using a graph.