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Economics (307)
ECON 1901 (44)
Chapter 3

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Department
Economics
Course
ECON 1901
Professor
Nathan Blascak
Semester
Spring

Description
Chapter 3:Supply and Demand I.The Demand Curve for Oil • demand curve- a function that shows quantity demanded at different prices -shows quantity demanders are willing and able to buy at different prices A. Consumer Surplus 1.Consumer surplus- a consumer’s gain from exchange a.) on a graph, total consumer surplus is the shaded area beneath the demand curve and above the price b.) can calculate consumer surplus using formula for right triangle (bh/2) B. What shifts the demand curve? 1.Increase in demand shifts the curve outward, up, and to the right 2. A decrease in the curve shifts the demand inward, down and to the left • Important Demand Shifters 1.Income a.) normal good- when increase in income increases the demand for a good b.) inferior good- a good in which an increase in income decreases the demand for a good 2.Population- more people, more demand 3.Price of substitute a.) a decrease in the price of a substitute will decrease the demand for the original product 4.Price of complements a.) complements- things that go well together i.) greater consumption of good A --> greater consumption of its compliment, good B ii.) a decrease in the price of a complement increases the demand for a complementary good iii.)an increase in the price of a complement decreases the demand for the complementary good 5.Expectations- an expectation for future reduction increases present day demand
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