Supply and Demand Shifts

Supply and Demand Shifts - short run. (This includes new...

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1 Basic Supply and Demand Shifts 1. 2. What shifts the supply curve? 3. What shifts the demand curve? Changes in demand (D) vs. changes in quantity demanded (D S ) When economists say that demand increases, they mean that the demand curve (D) shifts to the right. When economists say that the quantity demanded increases, they mean that the quantity demanded at the market price (Q D ) increases. Two principles governing supply shifts Anything that reduces costs (lower input prices or superior technology) increases supply. New capacity increases supply in the short run. Two principles governing supply shifts Anything that reduces costs (lower input prices or superior technology) increases supply. New capacity increases supply in the
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Unformatted text preview: short run. (This includes new entrants.) Substitutes and Complements Two goods are substitutes (used instead of one another) if an increase in the price of one causes the demand for the other to rise . Two goods are complements (used together) if an increase in the price of one causes the demand for the other to fall . Normal and Inferior Goods A good is normal if higher incomes cause demand to increase . A good is inferior if higher incomes cause demand to decrease . 2 Two More Demand Shifters (2) Demographic changes may shift demand. Preferences are what make you happy. Economists typically do not attempt to explain preferences. (1) Demand may shift because consumers preferences shift....
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This note was uploaded on 04/02/2008 for the course ECON 200 taught by Professor Cramer during the Spring '07 term at University of Arizona- Tucson.

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Supply and Demand Shifts - short run. (This includes new...

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