This preview shows pages 1–3. Sign up to view the full content.
This preview has intentionally blurred sections. Sign up to view the full version.View Full Document
Unformatted text preview: 1 Econ 1, Winter 2008 RATIKA NARAG, Ph.D. LECTURE 4 Recap of the Demand/Supply Model – Law of Demand: Ceteris paribus, as prices rise, quantity demanded falls – Shifts vs. Movement Along the Curve – Equilibrium: Quantity demanded = Quantity supplied LECTURE 4 Causes of Shifts in the Demand Curve – Changes in prices of related goods – Changes in income – Changes in taste – Changes in expectation LECTURE 4 Shifts vs. Movement Along the Curve – Shift: change in the quantity demanded at any given price – Movement along the curve: change in the quantity demanded of a good/service resulting from a change in its price LECTURE 4 Shifts Vs. Movement Along the Curve LECTURE 4 Substitutes: – Goods that serve as replacement for one another – When the price of one , demand for the other Complements: – Goods that “go together” – When the price of one , demand for the other 2 LECTURE 4 EXAMPLE: hamburger, chicken, and Ketchup Price of hamburger rises Law of demand: quantity demanded of hamburgers will fall Demand for complement good (ketchup) will fall (shift to the left) Demand for substitute good (chicken) will rise (shift to the right) LECTURE 4 Step 1: Look at Hamburgers LECTURE 4 Step 2: Demand for the complement good LECTURE 4 Step 3: Demand for the substitute good LECTURE 4 Changes in Income: Higher income decreases the demand for the inferior good Higher income increases the demand for the normal good LECTURE 4 Increase in Income: Inferior Goods 2 LECTURE 4 EXAMPLE: hamburger, chicken, and...
View Full Document
This note was uploaded on 03/20/2008 for the course ECON 1 taught by Professor Nagata during the Fall '08 term at UCLA.
- Fall '08