Midterm 1. Chapter 4 - Supply.Demand

Midterm 1. Chapter 4 - Supply.Demand - Chapter 4 Chapter...

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Chapter name Chapter 4 The Market Forces of Supply and Demand
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Chapters 1-2 Review: Scarcity - what makes something scarce? What is the economic problem? What are the 5 factors of production? What was Adam Smith famous for? What is the difference between micro & macroeconomics?
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Chapters 1-2 Review: Opportunity cost – what is it? What is the ultimate opportunity cost? What is a sunk cost? Should we consider sunk costs when making decisions? What does ceteris paribus mean? Is it always a good assumption to make?
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Chapter 4 Study Checklist: Required reading : Chapter 4: entire chapter Online practice quiz questions : Chapter 4: #3-10
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Supply and Demand: Introduction Modern economics is about supply , demand , and market equilibrium . Supply and demand are the forces that make market (capitalistic) economies work. Demand and supply are the most fundamental and the most powerful of all economic tools. Equilibrium
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Demand: Definitions Demand: a relationship between: The _price____ of a G/S, and The _quantity__ that consumers are willing and able to buy per period Ceteris paribus (other things constant) Note : consumer demand and needs/ wants are not the same. Wants are unlimited! Consumers can’t demand what they can’t afford. Demand is determined by income, tastes,
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Demand schedule: (demand table) A table representing demand The information it contains describes the different quantities of a G/S that a buyer is willing and able to purchase at different prices. points Price per case of DDT Quantity Demanded per week (millions) a b c d e $15 12 9 6 3 8 14 20 26 32
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Demand Curve: Demand curve: A curve showing the relation between the price of a G/S and the quantity consumers are willing and able to buy per period, other things constant. The graphical representation of demand showing the downward- sloping relationship. D a b c d e 2 2 1 8 Millions of cases of DDT per week 3 9 6 3 Price pe r ca se $ Demand Curve
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Law of Demand & the Demand Curve: There is a tendency for the quantity demanded of a G/S to decline as its price rises (or vice versa). price goes up, quantity decrease or price does down, quantity demanded increases Ex) Suppose the price falls from $240 to 99 A B
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Demand Technicalities: any movement along a demand curve reflects a change in quantity demanded , not a change in demand The ONLY thing that causes a change in quantity demanded is a change in the G/ S’s own price. a change in demand refers to a shift in the demand curve
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Demand: All Other Things (not being) Equal The demand curve is drawn assuming that all other things are equal, except the price of the good. The variables listed on the next few slides also affect the
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This note was uploaded on 09/23/2011 for the course ECON 2106 taught by Professor Trandel during the Spring '07 term at University of Georgia Athens.

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Midterm 1. Chapter 4 - Supply.Demand - Chapter 4 Chapter...

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