2 - Economic complements two goods for which an increase in...

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GECON 200 9/2/08 Notes Demand and Markets Tradition – Command – Market Making economic decisions What? “Dollar voting” How? Cost of resources For whom? Willingness and ability to pay Role of property rights The freedom to use, buy or sell something as the owner sees fit Necessary to markets Implies that property can’t be taken without paying the owner When they’re absent = markets fail Ex: American buffalo, ocean fish, apples at the public park, free exchange of public music Buyers – Sellers – Markets Demand A conditional desire to purchase. “it depends” Law of Demand
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The higher the price, the lower quantity demanded; the lower the price, the higher the quantity demanded; other things equal Six influences on demand Price Income If income goes up, the demand for all normal goods goes up If income goes up, the demand for all inferior goods goes down Prices of related goods
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Unformatted text preview: Economic complements two goods for which an increase in the price of one leads to a decrease in the demand for the other Economic substitutes two goods for which an increase in the price of one leads to an increase in the demand for the other Tastes taste increases, demand increases Number of buyers more buyers, greater demand (Buyer) Expectations a higher expected future price, increases demand now Other Things Equal (ceteris paribus) Market Demand vs. Individual Demand Horizontal addition: add up quantities for all buyers at various prices Shift of demand curve vs. movement along P rice: movement along a (fixed) demand curve Income: shift of a demand curve Price of related goods: shift of a demand curve Tastes: shift of a demand curve Expectations: shift of a demand curve # of buyers: shift of a demand curve...
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2 - Economic complements two goods for which an increase in...

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