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Chapter 3

Economics 101: Chapter 3

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Department
Economics
Course
ECON 101
Professor
Robert Gateman
Semester
Fall

Description
Economics 101: Principles of Microeconomics Chapter 3 3.1 Demand Quantity Demanded:  Total amount of a good that a consumer wants to purchase in a given time period  Amount the consumer wants to buy, not necessarily is going to buy  Influenced by several different factors o Product's price, income, price of other goods, tastes, population, future expectations  Ceteris paribus: other things equal Quantity Demanded and Price  Hold all other variables constant (excluding price)  Price of the product and the quantity demanded are negatively related (given ceteris paribus)  Many different alternatives or substitutes for most products/goods Demand Schedules and Demand Curves:  Demand schedule: a way of showing the relationship between Qd and price (ceteris paribus) o Table showing Qd at various prices  Demand curve: shows Qd and a given price (determined at points along the curve)  Demand is the entire relationship between Qd and price Shifts in the Demand Curve:  The curve shifts when other variables (excluding cost) change o The more that is desired → shift right o The less that is desired → shift left 1. Consumer's Income: demand shifts depending on the level of household income a. Higher income → increase in Qd of normal goods b. Lower income → decrease in Qd of inferior goods 2. Prices of other goods: substitutes in consumption, or complements in consumption a. Price of substitute products fall or rise will affect the demand curve of a product/good b. Price of complements can also have a positive or negative affect on a product/good 3. Tastes: shift in the Qd of one product to another (innovation, style etc.) a. Change in technology or a fad product b. Also includes the consumers perception of the quality or benefit of a good 4. Population: increase in population → increased purchasing power a. Increased population → shifts the demand curve right b. More Qd at each price 5. Expectations about the future: speculation of what might happen in the future a. Increased expectations about the future will increase demand (shift right) Economics 101: Principles of Microeconomics Movements along the Curve:  May be both a shift in the demand curve and a movement along the curve o Shift may occur, but some consumers may switch to substitutes  Change in demand: change in Qd at every price (shift in the demand curve)  Change in quantity: movement from one point to another on the demand curve  The change in demand and price is the net effect of a shift and movement along the demand curve 3.2 Supply Quantity Supplied:  Amount of a good or service, producers want to sell in a given time period o Not necessarily the actual amount a producer will end up selling  Influences by other variables (excluding price) o Price, input prices, technology, taxes/subsidies, substitute prices, # of suppliers Quantity Supplied and Price:  Price of the product and the quantity supplied are positively related (given ceteris paribus)  As price rises, producing and selling a product may become more profitable Supply Schedules and Supply Curves:  Supply Schedule: relationship between Qs and the price (ceteris paribus)  Supply
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