Econ 101 Winter 2010 Lecture 7

Econ 101 Winter 2010 Lecture 7 - Economics 101...

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Click to edit Master subtitle style Lecture 1 Economics 101 Microeconomics University of Michigan Winter 2010 Lecture 7
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Lecture 1 22 Announcements n Today’s reading: n Chapter 3, p 66 – 74, Chapter 4, p 98 – 101 (Demand Decisions) n Office Hours: n Monday: 12 – 2 n Tuesday: 10 – 1 n Wednesday: 12 – 2 n Thursday: 11 – 2 n Or call (734) 358 1590 for an appointment n No quiz in discussion section this week n Problem set 3 available on CTools
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Lecture 1 33 Supply Curve Quantity Price Supply P0 Qs1 Qs0 P1
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Lecture 1 44 Demand Curve Quantity Price Demand P0 Qd1 Qd0 P1
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Lecture 1 55 But where do prices come from? Two elements in model of the market: n Supply Curve n Describes suppliers’ decisions about how much to supply at the given price n Demand Curve n Describes consumers’ decisions about how much to buy at the given price But what price will prevail in the market? n Predict a price that has no inherent tendency to change n Equilibrium
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Lecture 1 66 Market Prices Quantity Price Supply Demand P0 Qd0 Qs0 Excess Supply
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Lecture 1 77 Excess Supply Quantity supplied exceeds quantity demanded at given market price n Sometimes call this a “surplus” in the market Suppliers who wish to sell units at the given price are unable to find buyers n These suppliers have incentive to reduce prices n As the price is inherently unstable, this is not a good prediction of where the price will be
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Lecture 1 88 Market Prices Quantity Price Supply Demand P1 Qs1 Qd1 Excess Demand
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Lecture 1 99 Excess Demand Quantity demanded exceeds quantity supplied at given market price n Also call this a shortage in the market Consumers who wish to buy units at the given price are unable to find sellers n These buyers tend to bid prices higher n As the price is inherently unstable, this is not a good prediction of where the price will be
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Lecture 1 10 10 Market Prices Quantity Price Supply Demand P* Qd*= Qs*
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Lecture 1 11 11
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Econ 101 Winter 2010 Lecture 7 - Economics 101...

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