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lec02 - Demand and Supply Determines price of each good and...

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1 Demand and Supply Determines price of each good and the amount that is sold. Example: Salmon! 2 Demand Price Quantity demanded $ 8 12,000 pounds $ 6 18,000 pounds $ 4 24,000 pounds Let’s graph these numbers. 3 The vertical axis is the PRICE of salmon, in dollars per pound. Price 4 Quantity The horizontal axis is the QUANTITY of salmon that consumers buy, in thousands of pounds. Price 9 Price Quantity $8 $6 $4 Demand This line is called the demand curve. 12 18 24 10 Price Quantity Demand Demand Curve Gives quantity that consumers buy at each price.
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12 Price Quantity Demand Law of Downward-Sloping Demand When price drops, the quantity demanded rises, all else held constant. P2 P1 Q2 Q1 14 Price Quantity Demand Law of Downward-Sloping Demand When price rises, the quantity demanded drops, all else held constant. P1 P2 Q1 Q2 15 Price Quantity Shifts in Demand Curve Rise in income causes demand curve for salmon to shift outward. 16 Price Quantity Shifts in Demand Curve New report showing that salmon is not so healthy causes demand curve to shift inward.
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