Lecture 3 - 9/16/2009 Announcements Reading for today text...

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9/16/2009 1 Announcements ± Reading for today ± text Chapter 3 pp. 52-66 (50-64 5 th edition) ± Reading for Wednesday ± text Chapter 3 pp. 66-77 (64-75 5 th edition) ± Homework #1 posted to “Homework” section of class website available under the “web content” section of C-Tools ± Homework #1 Solutions posted ± Homework #2 to be posted to website this week ± Make sure you study the homework tonight! ± Pop quizzes may start this week in sections The Market ± Adam Smith (1723-1790) moral philosopher, pointed out the virtues of the market ± The Wealth of Nations ± “He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. . .., he intends only his own security; he 3 intends only his own security; . .., he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it.” The Market ± In applying our tools, we have to specify the market we are analyzing ± What – for example “crude oil” What for example crude oil ± Where – for example “in the U.S.” ± When – for example “during the early 1970’s” ± model of demand and supply ± demand supply market equilibrium Demand and Supply ± demand --- the amount of a good people are willing to buy ± demand curve --- relationship between the price of a good and the quantity demanded, all other things being equal 4 demand, supply, market equilibrium Demand Curve Price Quantity Demanded 29 67 10 5 14 3 18 1 4 ± when price increases, the tit d d d f ll ± demand --- the amount of a good people are willing to buy ± demand curve --- relationship between the price of a good and the quantity demanded, all other things being equal 18 20 unit) D quantity demanded falls ± law of downward sloping demand ± change in quantity demanded refers to movement along the demand curve 0 2 4 6 8
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Lecture 3 - 9/16/2009 Announcements Reading for today text...

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