econ100_wntr2010_lec1_topost

econ100_wntr2010_lec1_topost - Overview & Review: Supply &...

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Overview & Review: Supply & Demand
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Macroeconomics (Unemployment, GDP, Overall Economic Performance) Supply & Demand at Market Level: Equilibrium Prices and Quantities, Comparative Statics Individual Behavior (Microeconomic Foundations)
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Supply & Demand • Consider supply and demand curves for goods and the equilibrium determined by their interaction • Demand function: summarizes relationship between quantity demanded and price (holding all else constant) • Supply function: Summarizes relationship between quantity of a good supplied and price (holding all else constant)
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Demand function can give • Price as a function of quantity(―inverse demand‖) • Quantity as a function of price – Relates P & Q, all else held constant • Holds constant all OTHER factors (income, tastes, prices of other goods, population) – Ex: Demand for laptop computers
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What can SHIFT the demand curve? Income (average and distribution) – Higher demand for laptops as income rises Prices of other goods – Price of notebook, desktop computers Tastes/Preferences – Prefer to work/play at home, at school, etc. Population – Market demand depends on how many in market Expectations – Expect better quality laptops soon, reductions in P
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Demand Curve P Q D=Q(P;P x ,I,T,Pop,Exp)
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Demand Curve with Increase in Income I’ > I P Q D=Q(P;I) Q(P;I’)
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Price of ―other‖ goods Substitutes : increase in the price of A leads to an INCREASE in the quantity demanded of B (A and B are substitutes) – Desktop, notebook computers, PDAs Complements
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This note was uploaded on 02/27/2010 for the course ECN 40279 taught by Professor Annstevens during the Spring '10 term at UC Davis.

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econ100_wntr2010_lec1_topost - Overview & Review: Supply &...

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