Lecture 9 - LECTURE 9 CHANGES IN MARKET CONDITIONS change in income change in price of another good substitutes complements natural conditions

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LECTURE 9 1 LECTURE 9: CHANGES IN MARKET CONDITIONS - change in income. - change in price of another good - substitutes - complements. - natural conditions Mankiw: Chapter 4
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LECTURE 9 2 CHANGES IN EQUILIBRIUM What happens as income/wealth increases? Golf-club memberships Start at status-quo : D and S . Equilibrium, E. Income increases
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LECTURE 9 3 Which curve is affected and how? - at any given price , more people want to play golf - normal good. Q d 8 , demand curve shifts to right, D 6 D’ . - supply curve unaffected. How does equilibrium change? E F . At new equilibrium: Price 8
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LECTURE 9 4 How does economy move from old to new equilibrium ? At old price - shortage. Each club finds it can increase its price and not loose members, price 8 . As price 8 , on demand side: People buy less memberships. Move along D’ curve, Q d 9 . on supply side: Clubs buy faster golf-carts, hire more workers in restaurants, etc. Move along S curve, Q s 8 . Process continues. Prices rise and shortage shrinks till:
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This note was uploaded on 10/29/2011 for the course ECON 2010 taught by Professor Mertens,wi during the Spring '07 term at Colorado.

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Lecture 9 - LECTURE 9 CHANGES IN MARKET CONDITIONS change in income change in price of another good substitutes complements natural conditions

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