Lecture Notes 9-21-09 Chapter 4 and 5

Lecture Notes 9-21-09 Chapter 4 and 5 - Demand Curve:...

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Demand Curve : Downward sloping Supply Curve : Upward Sloping Equilibrium : The price that equates quantity supplied with quantity supplied Surplus : When quantity supplied is greater than quantity demanded Sellers try to increase sales by cutting price Causes Qd to rise and Qs to fall—which reduces surplus Prices continue to fall until market reaches equilibrium Shortage : When quantity demanded is greater than quantity supplied Facing a shortage sellers raise the price—causing Qd to fall and Qs to rise Prices continue to rise until market reaches equilibrium Three Steps to Analyzing Changes in Equilibrium 1. Decide whether event shifts S curve, D curve, or Both 2. Decide which direction curve shifts 3. Use supply demand diagram to see how the shift changes equilibrium Price and Quantity 4. Are products substitutes or complements A competitive market has many buyers and sellers, each of whom has little or no influence. Besides price, demand depends on buyer’s incomes, tastes, expectations, the prices of substitutes and
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This note was uploaded on 01/25/2010 for the course ECONOMICS 220:102 taught by Professor Zhang during the Fall '09 term at Rutgers.

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Lecture Notes 9-21-09 Chapter 4 and 5 - Demand Curve:...

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