03GottDDSSShow

03GottDDSSShow - Chapter 3 Demand and Supply On reserve...

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Chapter 3 Chapter 3 Demand and Supply On reserve: Study Guide , Gottheil . Assumptions : · Perfect competition . · Perfect information . · All sellers sell the same quality product . ( homogeneous product) What factors determine quantity purchased? First : focus on price and “ quantity demanded .” Ceteris paribus
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2 Sources of confusion Separate demand from supply Distinguish between: Change in demand (or supply) Change in quantity demanded (or supplied)
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3 MARKET DEMAND CURVE FOR FISH Demand Schedule LAW of DEMAND Inverse relationship. Why? Income effect Substitution effect Sum of all individual demand curves
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4 $20 $15 $10 $5 10 20 30 40 A B A change in price causes a change in the quantity demanded D P Q 50 Ceteris paribus
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5 What can cause a change in demand ? [ shift in curve] Tastes and preferences Number of buyers in the market Incomes of buyers (assume its distribution) Expectations of buyers Prices of related goods Substitute goods Complementary goods
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6 $20 $15 $10 $5 10 20 30 40 D 1 D 2 P 50 A If ceteris paribus relaxed, the whole curve shifts Q B
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03GottDDSSShow - Chapter 3 Demand and Supply On reserve...

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