Comm 295 - Lecture 1

Comm 295 - Lecture 1 - Comm 295 Lecture 1 Demand...

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Comm 295 Lecture 1 Demand - Relationship between quantity consumers want and price o Graph: price (y-axis) vs. quantity (x-axis) - Law of demand : demand curve has negative slop – the lower the price the more we want - Other factors which have influence (usually hold these constant): o Income o Taste o Knowledge - “Change in demand” implies a shift in the curve o This is a change in anything outside of the good’s own price (income, substitute price) - “Change in quantity demanded” is a movement along the curve o This movement along the curve is based on a change in the good’s own price Substitute Goods - An increase in demand for one leads to a decline in demand for the other - Examples: butter and margarine, tea and coffee Complement Goods - An increase in demand for one leads to an increase in demand for the other - Examples: pencils and erasers, peanut butter and jam Demand Equation Qd=Qd (p1, p2, Y,…) o Where p1 = price of the good o Where p2 = price of substitute good o
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Comm 295 - Lecture 1 - Comm 295 Lecture 1 Demand...

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