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Presentation5 - Introductiontomicroeconomics...

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Introduction to microeconomics Wednesday, September 2, 2009
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The demand for coffee (billions of pounds/year) is a function of: Tastes The price of coffee The price of other goods Substitutes:  Two goods are  substitutes  if a fall in the price of one of the goods  makes consumers less willing to buy the other good . (tea)  Complements:  Two goods are  complements  if a fall in the price of one good  makes people more willing to buy the other good .   (cream and sugar)   Per capita income Normal goods:  When a rise in income increases the demand for a good - the  normal case.  Inferior goods:  When a rise in income decreases the demand for a good Population Price expectations
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A demand schedule  shows how much of  a good or service  consumers will want  to buy at different  prices –holding all  other variables  constant. 7.1 7.5 8.1 8.9 10.0 11.5 14.2 Price of coffee  beans (per  pound) Quantity of coffee  beans demanded  (billions of pounds  per year) 1.75 1.50 1.25 1.00 0.75 0.50 $2.00 Demand Schedule for Coffee Beans
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demand curve  is the graphical  representation of the demand schedule;  it shows how much of a good or service  consumers want to buy at any given  price per unit time. 7 0 9 11 15 13 17 $2.00 1.75 1.50 1.25 1.00 0.75 0.50 Price of coffee bean (per gallon) Quantity of coffee beans (billions of pounds) Demand curve, D As price rises, the quantity demanded falls
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An increase in the population  and other factors generate  an increase in demand –  a rise in the quantity  demanded at any given  price.  This is represented by the  two demand schedules - one  showing demand in 2002,  before the rise in population,  the other showing demand in  2006, after the rise in  population. 7.1 7.5 8.1 8.9 10.0 11.5 14.2 8.5 9.0 9.7 10.7 12.0 13.8 17.0 in 2002 in 2006 $2.00 1.75 1.50 1.25 1.00 0.75 0.50 Price of coffee  beans (per  pound) Quantity of coffee beans  demanded (billions of  pounds) Demand Schedules for Coffee Beans
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shift of the demand curve  is a change in the quantity demanded at any  given price, represented by the change of the original demand curve to a new  position, denoted by a new demand curve. Increase in  Increase in  population  population  more coffee  more coffee  drinkers drinkers Price of coffee beans (per gallon) 7 0 9 11 15 13 17 $2.00 1.75 1.50 1.25 1.00 0.75 0.50 D 1 D 2 Demand curve in 2006 Demand curve in 2002 Quantity of coffee beans (billions of pounds)
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7 8.1 9.7 0 10 15 13 17 $2.00 1.75 1.50 1.25 1.00 0.75 0.50 D 1 D 2 A C B A shift of the  demand curve… … is not the same thing  as a movement along  the demand curve Price of coffee beans (per gallon) Quantity of coffee
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Presentation5 - Introductiontomicroeconomics...

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