Lecture 7 - supplied (moving back along the supply curve)...

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I. Three Particular Demand ceteris Paribus conditions: a. Income: (I) i. Normal goods: Income and demand move in the same direction ii. Inferior Goods: Income and demand move in opposite directions b. Prices of other goods: (Px) i. Good X and Y are substitutes if an increase in the price of X causes an increase in the demand for Y. ii. Coke vs. Pepsi iii. X and Y are compliments if an increase in the price of X causes a decrease in the demand for Y c. Anything else that affects demand (X) i. Weather, new information $/Pack S P1 P2 D (I, Px, X) D2 Q2 Q1 Pack. Tobacco is inferior o An increase in income results in a decrease in demand. A drop in demand (the location of the entire demand curve) results in a decrease in price, a decrease in equilibrium quantity, a decrease in quantity
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Unformatted text preview: supplied (moving back along the supply curve) Solar Power $/watt S D1(I,Px,X) D(I,Px,X) Watt Oil and solar power are substitutes If the price oil increases, demand for solar power increases The increase in demand increased price, increased equilibrium, increased quantity supplied. $/Bottle S D1 Bottles Then it is discovered that red wine deduces the risk of heart disease! This discovery increases demand for red wine Price increases Equilibrium Q increases Quantity supplied increases First Law of Supply: Price increases causes quantity supplied to increase, ceteris paribus...
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This note was uploaded on 09/28/2009 for the course ECON 1101 taught by Professor Evans during the Fall '08 term at Cornell University (Engineering School).

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Lecture 7 - supplied (moving back along the supply curve)...

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