Macroeconomics Notes 2-25-08

Macroeconomics Notes 2-25-08 - Macroeconomics Notes 2/25/08...

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Macroeconomics Notes 2/25/08 - Price Determination o In a perfectly competitive market, the two forces that determine price are demand and supply - Exceptional demand curve : same amount of a good will be purchased regardless of the price (demand is fixed) - A commodity which has a snob appeal might have a rising demand curve as price increases o Luxury cars o Jewelry, perfume - Giffen goods : the more expense something is, the more desirable it becomes - Supply : the amount producers are willing and able to sell during a specific period at specific prices o If something is not offered for sale, it is not considered part of the supply - Individual supply schedule of Mr. Smith the bread-baker Price of Bread Quantity of Supply $8 $7 $6 $5 $4 $3 $2 $1 32 loaves 29 loaves 26 loaves 23 loaves 20 loaves 17 loaves 14 loaves 11 loaves - Market supply is the aggregation of individual supply schedules (just the market demand) - Example: assume that we have 10 million chicken breeders Price of Chicken Quantity of Supply
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Macroeconomics Notes 2-25-08 - Macroeconomics Notes 2/25/08...

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