Lecture4_Lecture_Notes - AEM 250 CLASS NOTES LECTURE 4 For...

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AEM 250 CLASS NOTES LECTURE 4 For Wednesday and Friday Read: Harris Appendix 3A; review buyer + seller instructions on blackboard Economics Study: Warren 101, Wednesday January 31 st @ 9:05 Today Demand and Demand for Water Why water? a fundamental right: the United Nations Committee on Economics affirmed that access to “adequate amounts of clean water for personal and domestic uses is a fundamental human right of all people.” AND “the human right to water is indispensable for leading a life in human dignity. It is a prerequisite for the realization of other human rights.” a scarce resource : “although water is special, both its provision and use will respond to economic and market signals,” (Economist, July 17, 2003) Ceteris Paribus is a Latin phrase used by economists to indicate that everything else is held constant. Isolate the relationship between prices and quantities. D(P) = 112.50 – 50P (demand function) P(Q) = 2.25 – 0.02Q (inverse function) *this is all in the gobbets CHOKE PRICE: the highest price that the consumers will pay for a certain product. Anything above that will force the consumers to buy alternative products. The “Law” of Downward Sloping Demand : the tendency for the quantity demanded of a good in a market to fall when prices rise. What happens when the prices rises ? One individual will buy less of that good and more of the other. Substitute cheap for expensive. In respect to water, the DEMAND can depend upon Income (need water for your yard if you’re rich and have many acres), rainy days, warm days, and price. right shift in the demand curve if income rises and there is a greater demand for goods left shift in the demand when there is less of a need of water (rainy days) LECTURE 6 2.2 A shift in the demand curve to the LEFT indicates a decrease in demand. A shift in the demand curve to the RIGHT indicates an increase in the demand. A movement along the demand curve: a decrease in price increases the quantity demanded. A movement along the demand curve: an increase in the price decreases the quantity demanded. Q demanded = a-bP [a is the intercept on the x-axis] (can add income, price of related goods, and many other factors to this equation) Substitute : A good that has many of the same characteristics as, and can be used in place of, another good. As the price of one good goes up, the demand for the other good rises (coffee and tea). As the price of a substitute goes up, you’ll start to purchase more of another good. Complement : A good that is usually consumed or used together with another good. As the price of one good goes up, the demand for the other good falls (tea and milk).
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AEM 250 CLASS NOTES if the population rises and there is a greater demand for oil, the demand curve switches outward (the more people in the market, the more the shift outward in the demand) As gasoline prices go down, there is a rise in truck purchases. New Information (like the fact that trucks pollute a lot) causes an inward shift in the graph.
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Lecture4_Lecture_Notes - AEM 250 CLASS NOTES LECTURE 4 For...

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