lectureOutline02 - Introduction to Economics Topic 2:...

Info iconThis preview shows pages 1–5. Sign up to view the full content.

View Full Document Right Arrow Icon
ECO 100Y Introduction to Economics Topic 2: Demand and Supply Source: LR12, LR 11, LR10 Ch. 3 and LR12, Ch. 5 to pg 97; LR11 to pg 103; LR10 to pg 105. 1 Topic 2: Demand and Supply ECO 100 W.G. Wolfson Demand and Supply Analyze in detail the interactions between buyers and sellers Isolate one market in the Circular Flow and focus on it We start with one of the Output Markets Buyers are the demanders We develop the Demand Schedule and Demand Curve Sellers are the suppliers We develop the Supply Schedule and Supply Curve Bring Demand (D) and Supply (S) together D = S determines an Equilibrium in a single market ECO 100 W.G. Wolfson Slide 2 Topic 2: Demand and Supply 1 2
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Demand Quantity demanded (Q D X ) The amount of a commodity (Good X) that a household ( consumer ) desires to purchase Time is important Per Day? Per Month? Per Year? We usually leave this as implicit! Note that Q D X is “desired”, not actual Actual amount determined by the equilibrium ECO 100 W.G. Wolfson 3 Topic 2: Demand and Supply Determinants of Demand for Good X (Q D X shown as Q X below) Price of Good X Q X / P X < 0 (usually) Price of Good Y (a substitute for Good X) Q X / P Y > 0 Price of Good Z (a complement to Good X) Q X / P Z < 0 Tastes / Preferences Can lead to Q X > 0 or Q X < 0 ECO 100 W.G. Wolfson 4 Topic 2: Demand and Supply 3 4
Background image of page 2
Determinants of Demand for Good X (Cont’d) Income If X is a normal good Q X / I > 0 If X is an inferior good Q X / I < 0 Other Factors Price Expectations Population (when considering total demand) ECO 100 W.G. Wolfson 5 Topic 2: Demand and Supply The Demand Schedule for Good X To derive the Demand Schedule for Good X, we need to isolate one determinant of quantity demanded Own price is the strongest driver (P X ) When isolating on the Price of X, we are implicitly assuming that all other determinants of demand are being held constant (“ceteris paribus”) We consider later what happens if one of these “constants” changes The Market Demand Schedule is the sum of the demand schedules of each individual consumer 6 Topic 2: Demand and Supply ECO 100 W.G. Wolfson 5 6
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
The Demand Schedule for a commodity shows the different quantities demanded when only the price of the commodity is allowed to change To the right are some points on a Demand Schedule that has this linear equation: P = 18 - Q Price of X Q Demande d $10 8 $8 10 $6 12 $4 14 $2 16 ECO 100 W.G. Wolfson 7 Topic 2: Demand and Supply The Demand Curve A Demand Curve graphs the relationship between the quantity demanded of a commodity and its own price A Demand Curve shows the maximum price that consumers are willing to pay for the last unit bought of the commodity Tradition places Price (P) on the Y-axis and Quantity (Q or sometimes q) on the X-axis Draw the D curve from the data
Background image of page 4
Image of page 5
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 15

lectureOutline02 - Introduction to Economics Topic 2:...

This preview shows document pages 1 - 5. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online