Econ201 Winter2014 Topic03 - Lesson Plan - Demand and Supply - Introduction to Microeconomics Topic 3 Demand and Supply Matthew Weinberg Abstract 1

Econ201 Winter2014 Topic03 - Lesson Plan - Demand and...

This preview shows page 1 - 3 out of 23 pages.

Introduction to Microeconomics Topic 3: Demand and Supply Matthew Weinberg January 14, 2014 Abstract 1 120-Minute Class 1. What is a Market? 2. Demand Q D quantity demanded at a given price Illustrating Demand: Demand Schedules and Curves The Law of Demand Why Does Demand Shift? (Define complements and substitutes, normal and inferior goods) Change in Number of Consumers Change in Consumer Preferences Change in Consumer Expectations Change in Prices of Related Goods Change in Consumer Income Individual vs. Market Demand 3. Supply Q S quantity supplied at a given price Illustrating Supply: Supply Schedules and Curves The Law of Supply Why Does Supply Shift? (Define complements and substitutes, normal and inferior goods) Technological Progress Change in Price of Inputs Change in Prices of Other Goods Produced with Same Inputs Change in Expectations Change in Number of Producers Individual vs. Market Supply (SKIP) 4. Equilibrium Shortages, Surpluses and Equilibrium Algebra of Equilibrium How do Demand Shifts Affect Equilibrium? How do Supply Shifts Affect Equilibrium? How do Simultaneous Shifts Affect Equilibrium? 1
Image of page 1
Last time, we showed that two parties, which could be individuals, firms, states, or countries, could gain from trade due to the law of comparative advantage, even if one party had an absolute advantage in the production of every good. But we didn’t say anything about how resources would be allocated, which is what we will now study. To determine how resources are allocated, we need to start with the type of economy we have. A market economy is an economy where prices are freely determined in markets where goods and services are openly exchanged. On one side, we have individuals’ desire for goods and services and their willingness to pay for them. On the other, we have firms’ ability to produce such goods and services and their level of compensation to do so. In this system, prices act as a signal to producers. Prices determine what is made, how much, and who gets it. This is the type of economy that most countries in the world have. In a command economy , a central government or social planner dictates production and prices (as in the former Soviet Union or in North Korea). There are several types of markets we will be studying in this course. We will study how the market structure affects the behavior of consumers and firms, how the market price is determined, and the welfare of consumers and firms. The first is a perfectly competitive market , which is defined as a market with many buyers and sellers of the same good or service, none of whom can influence its price. This means that all buyers and sellers are price takers - they take the price that the market determines as given. The idea behind this
Image of page 2
Image of page 3

You've reached the end of your free preview.

Want to read all 23 pages?

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

Stuck? We have tutors online 24/7 who can help you get unstuck.
A+ icon
Ask Expert Tutors You can ask You can ask You can ask (will expire )
Answers in as fast as 15 minutes