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ECN 204 (281)
Chapter 4

ECN204 Notes Chapter 4.doc

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Ryerson University
ECN 204
Christos Shiamptanis

ECN204 Notes Chapter 4 • Demand Curve Shifters o The demand curve shows how price affects quantity demanded, other things being equal. Changes in these “other things” shift the D Curve Variable A change in this variable… Price …causes a movement along the D Curve #of buyers …shifts the D Curve Income …shifts the D Curve Price of related goods …shifts the D Curve Tastes …shifts the D Curve Expectations …shifts the D Curve • Demand Curve Shifters: Income o Demand for a normal good is positively related to income  Increase in income causes increase in quantity demanded at each price, shifts D Curve to the right o Demand for an inferior good is negatively related to income. An increase in income shifts D curves for inferior goods to the left • Demand Curve Shifters: Prices of Related Goods o Substitutes – two goods are substitutes if an increase in the price of one causes an increase in demand for the other (e.g., Coke and Pepsi) o Complements – two goods are complements if an increase in the price of one causes a fall in demand for the other (e.g., computers and software) • Demand Curve Shifters: Tastes o Anything that causes a shift in tastes toward a good will increase demand for that good and shift its D Curve to the right • Chapter Summary o A competitive market has man
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