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Chapter 4

Chapter 4 Supply and Demand

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ECON 200
Robert Schwab

ch4 Thursday,February 6,2014 3:43 PM --- DEMAND Demand comes from the behavior of buyers. The quantity demanded of any good is the amount of the good that buyers are willing and able to purchase at alternative prices. Law of demand: the claim that the quantity demanded of a good falls when the price of the good rises,other things being equal. Demand schedule: a table that shows the relationship between the price of a good and the quantity demanded. change in quantity demanded • movement along the curve • variable: only affected by the change of price • according to law of demand: price ↓ qty demanded ↑ change in demand • shift the curve • variables: demand curve shifters • numbers of buyers • income • demand for a normal good is positively related to income • Jimmy Choo shoes • demand for an inferior good is negatively related to income • Forever 21 shoes? • bus fare,fast food,...babies? • prices of related goods • two goods are substitutes if an ↑ price of one causes an ↑ demand for the other • pizza and hamburgers • two goods are complements if price ↑ of one causes a ↓ demand for the other • computers and softwares • college tuition and textbooks • eggs and bacon • tastes • anything that causes a shift in tastes toward a good will increase demand for that good • the Atkins diet became popular in the 90s,caused an increase in demand for eggs • expectations • expectations affect consumers'buying decisions • if people expect their incomes to rise,they demand more • if apple says "we will have an iPhone discount on V-day",the demand of iPhone for today will drop-cuz people will wait --- Supply Supply comes from the behavior of seller. quantity supplied of a good is
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