Principles of Economics- Mankiw (5th) 68

Principles of Economics- Mankiw (5th) 68 - 72 PA R T T W O...

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72 PART TWO SUPPLY AND DEMAND I: HOW MARKETS WORK market demand curve. That is, to find the total quantity demanded at any price, we add the individual quantities found on the horizontal axis of the individual de- mand curves. Because we are interested in analyzing how markets work, we will work most often with the market demand curve. The market demand curve shows how the total quantity demanded of a good varies as the price of the good varies. SHIFTS IN THE DEMAND CURVE Suppose that the American Medical Association suddenly announces a new dis- covery: People who regularly eat ice cream live longer, healthier lives. How does this announcement affect the market for ice cream? The discovery changes peo- ple’s tastes and raises the demand for ice cream. At any given price, buyers now want to purchase a larger quantity of ice cream, and the demand curve for ice cream shifts to the right. Whenever any determinant of demand changes, other than the good’s price,
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This note was uploaded on 07/30/2010 for the course ECON 120 taught by Professor Abijian during the Spring '10 term at Mesa CC.

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