Chapter 4 - Supply and demand - an initial look

Chapter 4 - Supply and demand - an initial look - Chapter 4...

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Unformatted text preview: Chapter 4 Supply and Demand – An Initial Look The free enterprise system is absolutely too important to be left to the voluntary action of the marketplace. RI CHARD KELLY The Invisible Hand • Invisible hand – Adam Smith – People pursue own self-interests – “Led by an invisible hand” – Promote wellbeing of community 2 Demand and Quantity Demanded • Quantity demanded – Number of units – Consumers • Willing • Can afford to buy – Specified period of time 3 Demand and Quantity Demanded • Quantity demanded – Depends on price – “Other things being equal” • Population size • Consumer incomes • Tastes • Prices of other products 4 Demand and Quantity Demanded • Demand schedule - Table – Period of time – Quantity demanded changes • As price changes • All other determinants – constant • All other determinants constant – As price rises • Quantity demanded falls – As price falls • Quantity demanded rises 5 Demand schedule for beef Table 1 6 Price per pound Quantity demanded Label in Figure 1 $7.50 45 A 7.40 50 B 7.30 55 C 7.20 60 E 7.10 65 F 7.00 70 G 6.90 75 H Demand and Quantity Demanded • Demand curve – Graphical depiction of demand schedule – Quantity demanded – changes • Price – changes – Period of time – All other determinants – constant 7 Demand curve for beef Figure 1 8 D D 6.90 7.00 7.10 7.20 7.30 Price per Pound $7.50 7.40 45 50 55 60 65 Quantity Demanded in Millions of Pounds per Year 70 75 G A B C E F H Demand and Quantity Demanded • Change in price – Movement along demand curve • Change in other determinants – Shifts entire demand curve – Consumers - buy more (any & all prices) • Demand curve – shifts right/outward – Consumers – buy less (any & all prices) • Demand curve – shifts left/inward 9 Movement along versus shift of a demand curve Figure 2 10 D D 7.10 $7.30 Price per Pound Quantity Demanded in Millions of Pounds per Year C F D 1 D 1 Demand and Quantity Demanded • Consumer income - increase – Demand – increase • Outward shift • Population – increase...
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This note was uploaded on 09/23/2009 for the course ECO 108 taught by Professor Wolman during the Spring '08 term at SUNY Stony Brook.

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Chapter 4 - Supply and demand - an initial look - Chapter 4...

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