ch 2 Supply and Demand

ch 2 Supply and Demand - Econ 203 chapter 2 page 1 Chapter...

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Econ 203 chapter 2 page 1 Chapter 2: Supply and Demand Application: The implications of taxation (tax incidence) Market equilibrium, excess demand, and excess supply The law of demand and the law of supply Organization Context: Perfectly competitive markets consumers and firms are price takers But essentially builds on results of Chapters 4 and 11! Review of basic concepts Econ 103 This chapter: Overview
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Econ 203 chapter 2 page 2 Market • The buyers and sellers of a good or service • Practice: difficult to define where market begins or ends “The market demand function expresses the relationship between the total quantity demanded and the price of the product per unit of time, other things remaining the same.” ± Prices along the demand function represent the maximum amounts buyers will pay.
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Econ 203 chapter 2 page 3 Movement Along A Demand Function: 5 2 0 10 23 Quantity per day ± Generally, total quantity demanded increases when the price of the good decreases. ± This can be illustrated graphically as a movement along the demand function. Q d =D(P) A B Price
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Econ 203 chapter 2 page 4 ± A movement along a demand function always involves a change in the price of the good and a change in the total quantity demanded of that good. This relationship between price and the quantity demanded is called the Law of Demand. ± The increase in the quantity demanded is due to increased consumption by current consumers and new consumers . The law of demand: “The empirical observation that when the price of a product falls, people demand larger quantities of it.”
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Econ 203 chapter 2 page 5 FIGURE 2-1 The Demand Curve for Lobsters in Shediac, N.B., July 20, 2020 The demand curve tells the quantities buyers will wish to purchase at various prices. Its key property is its downward slope; when price falls, the quantity demanded increases. This property is called the law of demand. The Law of demand and the law of supply
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Econ 203 chapter 2 page 6 The above example happens to be linear , but demand curves are usually non-linear. The key property is that they are downward sloping: as price of
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This note was uploaded on 08/03/2011 for the course ECON 203 taught by Professor Okhan during the Spring '11 term at University of Victoria.

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ch 2 Supply and Demand - Econ 203 chapter 2 page 1 Chapter...

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