slides-class3 (handout).pdf - Microeconomic Principles...

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Microeconomic Principles Discussion for ECON 102 Andr´es Ham ECON 102 2/6/2015 Andr´es Ham (ECON 102) Microeconomic Principles 2/6/2015 1 / 24
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This week in one slide 1 Demand 2 Practice problems Andr´es Ham (ECON 102) Microeconomic Principles 2/6/2015 2 / 24
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Demand Demand Definition Demand expresses the relationship between the quantity we buy of a good and its price Usually, as prices increase (all else staying the same) do we buy more or less of an item? This is called the law of demand : as prices go up, we consume less Andr´es Ham (ECON 102) Microeconomic Principles 2/6/2015 3 / 24
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Demand Ways of representing demand As a demand schedule in a table: Table 1: Demand schedule for 16 GB iPads Price Quantity demanded 500 1 450 2 400 3 350 4 300 5 250 6 200 7 Andr´es Ham (ECON 102) Microeconomic Principles 2/6/2015 4 / 24
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Demand Ways of representing demand In graphical form (this is the one we use throughout the semester): 200 300 400 500 Price 0 2 4 6 8 Quantity demanded Andr´es Ham (ECON 102) Microeconomic Principles 2/6/2015 5 / 24
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Demand An important distinction There are two fine points you should be aware of (be very careful): 1 Demand refers to the whole line! So, when demand changes, it means that the whole line moves. 2 If the own price changes, this affects the quantity demanded (Why?) Because we move along the line, but (1) does not happen Result: changes in the own price of a good ONLY change the quantity demanded So, the natural question becomes: what changes demand ? Andr´es Ham (ECON 102) Microeconomic Principles 2/6/2015 6 / 24
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Demand Changes in demand There are 5 things which change demand: 1 Changes in the prices of related products 2 Changes in income 3 Changes in tastes 4 Changes in expectations 5 Changes in the number of consumers Andr´es Ham (ECON 102) Microeconomic Principles 2/6/2015 7 / 24
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Demand Changes in the prices of related goods: complements and substitutes Are these complements or substitutes?
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