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Economics (708)
Chapter 3

Econ Chapter 3 Notes.docx

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Department
Economics
Course
Economics 1021A/B
Professor
Emilie Rivers
Semester
Fall

Description
EconChapter3NotesSupplyandDemandMarketandPricesAmarkethastwosidesabuyerandasellerTherearemarketsforbothgoodsandservicesCompetitiveMarketamarketthathasmanybuyersandmanysellerssothatnoonebuyercaninfluencethepriceMoneyPricetheexchangeofdollarsforagoodserviceRelativePricetheratioofonepricetoanotherexIfcoffeecost1andapackofgumcosts50theopportunitycostofonecupofcoffeeistwopacksofgumoRelativepriceisanopportunitycostDemandIfyoudemandsomethingyoumust1Wantit2Canaffordit3PlantobuyitWantsaretheunlimiteddesiresforgoodsandservicesQuantityDemandtheamountthatconsumerplantobuyduringagiventimeperiodataspecificpriceofagoodserviceoSometimesthedemandexceedsthesupplysoconsumerhavetopurchaselessThelawofdemandthehigherthepriceofagoodthesmalleristhedemandThelowerthepriceofagoodthehigherthedemandSubstitutioneffectwhenthepriceofagoodrisesotherthingslikeitsrelativepriceandopportunitycostalsoriseEachgoodhassubstitutesothergoodsthatcanbeusedinitsplaceandasthecostofonegoodincreasesthemorelikelypeoplewillbuythesubstitutegoodIncomeeffectwhenapricerisesthepricerisesrelativetoincomeIfpricesriseandincomestaysthesamepeoplewillnotbuyDemandCurveDemandScheduleDemandtherelationshipbetweenpriceandquantityofagoodDemandCurvetherelationshipbetweenthequantitydemandedofagoodanditspriceWillingnessandabilitytopaythisisameasureofmarginalbenefitSmallquantityhighpricepaidLargequantitylowpricepaidChangeinDemandwhenanyfactorexceptpricechangesthiscanchangedemandFactorsthatchangedemand1ThepricesofRelatedGoods2ExpectedFuturePrices
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