Ch03 - Chapter 3 Demand supply and the market David Begg...

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Unformatted text preview: Chapter 3 Demand, supply, and the market David Begg, Stanley Fischer and Rudiger Dornbusch, Economics , 6th Edition, McGraw-Hill, 2000 Power Point presentation by Peter Smith 3.2 Some key terms ■ Market – a set of arrangements by which buyers and sellers are in contact to exchange goods or services ■ Demand – the quantity of a good buyers wish to purchase at each conceivable price ■ Supply – the quantity of a good sellers wish to sell at each conceivable price ■ Equilibrium price – price at which quantity supplied = quantity demanded 3.3 Demand and Supply of Chocolate Price Quantity DemandedQuantity Supplied 0.0 200 0 0.1 160 0 0.2 120 40 0.3 80 80 0.4 40 120 0.5 0 160 3.4 The Demand curve shows the relation between price and quantity demanded holding other things constant ■ “Other things” include: – the price of related goods – consumer incomes – consumer preferences ■ Changes in these other things affect the position of the demand curve D Quantity Price 3.5 Related Goods ■ Complements – these are used together ■ car - oil ■ tea - sugar – holding its own price constant – As the price of a complement increases – quantity demanded of a good decrease 3.63....
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Ch03 - Chapter 3 Demand supply and the market David Begg...

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