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ch02 ppt notes - Chapter Two Demand and Supply Analysis...

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1 Demand and Supply Analysis Chapter Two Chapter Two
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2 Chapter Two Overview 1. Motivation – U.S. dot coms 1. Competitive Markets Defined 1. The Market Demand Curve 1. The Market Supply Curve 1. Equilibrium 6. Characterizing Demand and Supply – Elasticity 7. Back of the Envelope Techniques Chapter Two
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3 Motivations Example: 1995 U.S. Corn Market Historical price: $2.00 per bushel Why? Weather Asian economic boom Prices rise to $5.00 per bushel Litigation to annul contracts Prices rose to $2.70 per bushel Long term contracts based on this price Chapter Two
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4 Motivations Example: 1995 U.S. Corn Market Prices return to $2.00 per bushel Why? Increased acreage Asian economic cool- down Historical price: $2.00 per bushel Chapter Two
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5 Defined: Competitive Markets Competitive Markets are those with sellers and buyers that are small and numerous enough that they take the market price as given when they decide how much to buy and sell. Chapter Two
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6 The Market Demand Function The Market Demand Function tells us how the quantity of a good demanded by the sum of all consumers in the market depends on various factors. Defined: Chapter Two
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7 Demand Curves The Demand Curve plots the aggregate quantity of a good that consumers are willing to buy at different prices, holding constant other demand drivers such as prices of other goods, consumer income, quality. Defined: Chapter Two
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8 The Demand for Cars Chapter Two
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9 The Demand for Cars We always graph P on vertical axis and Q on horizontal axis, but we write demand as Q as a function of P… If P is written as function of Q, it is called the inverse demand. Markets defined by commodity, geography, time. Chapter Two
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10 The Law of Demand The Law of Demand states that the quantity of a good demanded decreases when the price of this good increases. The Demand Curve
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This note was uploaded on 11/18/2010 for the course ECO 300 taught by Professor Zhao during the Spring '10 term at SUNY Albany.

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ch02 ppt notes - Chapter Two Demand and Supply Analysis...

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