ECON 111 Chapter Notes - Chapter 3: Pearson Education, Normal Good, Purch Group
27 May 2018
School
Department
Course
Professor
ECON 111: Introductory Microeconomics
Chapter 3 Notes
Term: Summer 2018
Course offered by:
Department of Economics
Faculty of Arts and Science
Queen’s University
Compilation date: May 15, 2018
Notes compiled by:
Tom (Ke Jun) Sung
B.A.Sc. Candidate
Queen’s University
Source:
Christopher T.S. Ragan, Microeconomics, 15th Canadian edition, Toronto: Pearson Canada Inc.,
2017.
Disclaimer:
The material in this document is taken from the mentioned source and should be used for
reference only. The document compiler cannot assure 100% accuracy as there may be errors
present in this document. The mentioned source should be used if there is any doubt on
information accuracy.
In addition, without permission from the owners (direct or indirect), the material in this
document cannot be reproduced. Thank you for your cooperation.
ECON 111: Chapter 3
Table of Contents
3.1: Demand ............................................................................................................................... 1
Quantity Demanded ........................................................................................................................... 1
Quantity Demanded and Price ........................................................................................................... 1
Demand Schedules and Demand Curves ............................................................................................ 1
Shifts in the Demand Curve ........................................................................................................................... 2
Consumer’s Income .................................................................................................................................. 2
Prices of Other Goods ............................................................................................................................... 2
Tastes ....................................................................................................................................................... 3
Population ................................................................................................................................................ 3
Significant Changes in Weather ................................................................................................................. 3
Movements Along the Curve Versus Shifts of the Whole Curve ...................................................................... 3
3.2: Supply.................................................................................................................................. 4
Quantity Supplied .............................................................................................................................. 4
Quantity Supplied and Price ............................................................................................................... 4
Supply Schedules and Supply Curves .................................................................................................. 4
Shifts in the Supply Curve .............................................................................................................................. 4
Prices of Inputs ......................................................................................................................................... 4
Technology ............................................................................................................................................... 5
Government Taxes or Subsidies ................................................................................................................ 5
Prices of Other Products ........................................................................................................................... 5
Number of Suppliers ................................................................................................................................. 5
Movements Along the Curve Versus Shifts of the Whole Curve ...................................................................... 5
3.3: The Determination of Price ................................................................................................. 6
The Concept of a Market .................................................................................................................... 6
Market Equilibrium ............................................................................................................................ 6
Changes in the Market Equilibrium .................................................................................................... 6
A Numerical Example ......................................................................................................................... 8
Relative Prices .................................................................................................................................... 8
Compiled by: Tom (Ke Jun) Sung
1
Chapter 3: Demand, Supply, and Price
3.1: Demand
Quantity Demanded
• Quantity demanded: the amount of a good or service that consumers want to purchase
during some time period
o This is a desired quantity; the amount consumers want to purchase. This may be
different from the amount consumers actually succeed in purchasing
§ Quantity demanded: refers to desired purchases
§ Quantity bought, or quantity exchanged: refers to actual purchases
o Refers to a flow of purchases, expressed as so much per period of time
• Quantity Demanded is influenced by the following variables:
o Product’s own price
o Consumers’ income
o Prices of other products
o Tastes
o Population
o Significant changes in weather
• Effects of changes in the products’ own price: consider the influencing variables one at a
time
• Holding variables constant is often described by “other things being equal”, “other
things given” or ceteris paribus.
Quantity Demanded and Price
• A basic economic hypothesis is that the price of a product and the quantity demanded
are related negatively, other things being equal. That is, the lower the price, the
higher the quantity demanded; the higher the price, the lower the quantity demanded
o Also called “law of demand”
• Products are used to satisfy desires and needs, and there is almost always one product
that will satisfy any desire or need
• Consider: If income, tastes, population, and the prices of all other products remain
constant. Price of only one product changes
o Price goes up, product is increasingly expensive to satisfy desire. Consumers look
for alternatives or stop buying
o Price goes down, product is cheaper way to satisfy desire. Households will
demand more of it
Demand Schedules and Demand Curves
• Demand schedule: a table showing the relationship between quantity demanded and
the price of a commodity, other things being equal
13
ECON 111 Full Course Notes
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Document Summary
Ragan, microeconomics, 15th canadian edition, toronto: pearson canada inc. , The material in this document is taken from the mentioned source and should be used for reference only. The document compiler cannot assure 100% accuracy as there may be errors present in this document. The mentioned source should be used if there is any doubt on information accuracy. In addition, without permission from the owners (direct or indirect), the material in this document cannot be reproduced. Movements along the curve versus shifts of the whole curve 3. Movements along the curve versus shifts of the whole curve 5. Quantity demanded: quantity demanded: the amount of a good or service that consumers want to purchase during some time period, this is a desired quantity; the amount consumers want to purchase. This may be different from the amount consumers actually succeed in purchasing.
