Lecture 3.docx - Quantity demanded … …is the amount of goods that buyers are willing and able to buy in a given time period(flow …rises if ceteris

Lecture 3.docx - Quantity demanded … …is the amount of...

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Quantity demanded …is the amount of goods that buyers are willing and able to buy in a given time period ( flow ). …rises if, ceteris paribus (other things constant) 1. price of the good falls ( law of demand ) 2. price of a substitutef good rises (pepsi, coke) If pepsi increases prices then the quantity demand of coke will rise 3. price of a complement good falls (cars, gas) If the price of gas rises in the long term the quantity demand of cars wil drop 4. average household income EC120 Lecture 3 – Supply, demand & price 1 of 24
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More income results in more people buy houses rises for normal goods (owned housing) falls for inferior goods (rented housing) 5. tastes change in favour of the product 6. population increases …fall if, the above changes are reversed EC120 Lecture 3 – Supply, demand & price 2 of 24
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Quantity supplied …is the amount of goods that sellers are willing and able to sell in a given time period ( flow ). Measured by unit of time …rises if, ceteris paribus (other things constant) 1. price of the good rises- Change in supply refers to change in the position of the supply curve Items 2 to 4 EC120 Lecture 3 – Supply, demand & price 3 of 24
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2. price of an input falls - supply will increase if purchase price is lower 3. production technology improves- Better technology can make production easier 4. number of sellers increases – If number of sellers increase then quantity supply will rise …falls if, the above changes are reversed EC120 Lecture 3 – Supply, demand & price 4 of 24
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Terminology The relationship between quantity demanded (supplied) and price is called demand ( supply
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