ECON 1B03 Chapter 3: Market Demand Example

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ECON 1B03 Full Course Notes
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ECON 1B03 Full Course Notes
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Suppose that there are only 2 consumers in market for candy bars - kylie and jack. Assume that income, prices of related goods, tastes and expectations are held constant/non-changing at this moment in time. Notice that even though qd depends on p, p is on vertical axis. We"re actually graphing inverse demand function where we treat price as a function of quantity. A change in quantity demanded: movement along demand curves due to change in price of good. A change in demand: shift of demand curve when anything other than price of good changes. An increase in demand: d shifts right. A decrease in demand: d shifts left. As income increases, demand for normal good will shift d to right. As income increases, demand for inferior good will shift d to left. If 2 goods are substitutes in consumption: an increase in price of one good will shift demand for other good to right.

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