note1 - ch3

note1 - ch3 - Econ 251 Fall 2009 Handout 3 09/01/09 Chapter...

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Econ 251 Fall 2009 Handout 3 09/01/09 1 Chapter 3 – Demand and Supply I. Def. Demand = the maximum quantity a consumer is ________________ and ____________ to purchase at various prices during some period, other things unchanged . Law of Demand: Inverse relationship between price and quantity demanded other things equal . This implies that: Assume the relationship between price (P) and quantity demanded (Q d ) is linear. Example: Demand for Mars chocolate bars 1 6 'Demand Function' 2 or 2 12 'Inverse Demand Function' d d Q P P Q = − + = − + The demand curve reflects the marginal benefit of a good. Ex. the marginal benefit of the 4 th unit is equal to: __________________________ . P ____________ ↑ ⇒ P _____________ ↓ ⇒
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Handout 3 09/01/09 2 Important to remember: - ___________________________ refers to the entire relationship between the price of the good and the quantity demanded of the good! - ____________________________ refers to a point on the demand curve! We represent demand changes by shifts in the demand curve. If Demand increases ___________________________________ If Demand decreases ___________________________________ Demand Factors that change the demand: 1. 2.
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note1 - ch3 - Econ 251 Fall 2009 Handout 3 09/01/09 Chapter...

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