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Third lecture - Third lecture Econ 101 Supply and demand...

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Third lecture. Econ 101 Supply and demand analysis Low of D&S: price adjusts to balance Qs and Qd CHANGE IN MARKET EQUILBRUM Events affects S&D When things other than price change=>supply and demand change=>equilibrium will change Ex: ice cream market see note 1 Three steps approach to analyzing change in equilibrium: 1)which curve is affected demand 2)whats the direction of change ? 3) Compare old and new equilibrium up and D up. All realtes to note 1 Ex:Hot weather +price of sugar note 2 3 steps 1)which curve? Both 2)which direction? Demand up Supply down 3) compare equilibrium Price up Q- ambiguous. When never both curves shift, we can only predict what happens to P or Q,but not both. Note 3 Ex: Housing market: a) consumer credit dries up(you cant buy house cause your bad credit)b)foreclosure rise(incomes of the pop decreased ) Which curve)both 2)which direction? Decreases demand Increase supply 3)compare Price decreases Quantity is ambiguous Ex see note 4 Price elasticity OF DEMAND Ex MARKET FOR sweatshirt; invention of inventing machine; 1)Supply 2)supply goes up 3)Compare see note 5
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we know price will go down and Q will go up but non much?
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