Chapter 4 Demand and Supply

Chapter 4 Demand and Supply - The Market Forces of Demand...

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The Market Forces of Demand and Supply Chapter 4
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Three Basic Questions What should we produce? How should we produce it? Who should consume what we produce? Market system works out the answers!
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Chapter Outline ± Markets have two sets of actors: ± Buyers – call this the demand side of the market ± Sellers – call this the supply side of the market ± Will begin by looking at the demand side in isolation. ± Then change gears and look at the supply side in isolation ± Then bring the demand and supply sides of the story together
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Determinants of Demand Food as an example Price of food Prices of other goods Income Tastes (preferences) Product quality Demographic factors Expectations
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Demand Schedule A demand schedule is a table that shows the relationship between the price of a good and the quantity demanded, other things held constant. Note: demand relationships hold for some period of time  how much do you want today? This week? This month? ….often we
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Price Al’s Demand $13 0 12 0 11 1 10 2 9 3 8 4 7 5 6 6 5 7 4 8
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Demand Curve A demand curve is a graph of the relationship between the price of a good and the quantity demanded, other determinants held constant. Note again: time matters….
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Price Quantity $6 6 Al’s Demand Curve Price AI’s Demand $6 6 $4 8 $4 8
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The law of demand is a claim that, other determinants held constant, the quantity demanded of a good falls when the price of the good rises . “Law” of Demand
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Price Al’s Demand $13 0 12 0 11 1 10 2 9 3 8 4 7 5 6 6 5 7 4 8
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Price Quantity $6 6 Al’s Demand Curve Price I’s Demand $6 6 $4 8 $4 8
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Price Al’s Demand Jo’s Demand $13 0 1 12 0 2 11 1 3 10 2 4 9 3 5 8 4 6 7 5 7 6 6 8 5 7 9 4 8 10
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Market Demand Schedule A market demand schedule is a table that shows the relationship between the price of a good and the quantity demanded by all buyers, other variables held constant.
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This note was uploaded on 12/30/2011 for the course ECON Econ 200 taught by Professor Clement during the Fall '11 term at Maryland.

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Chapter 4 Demand and Supply - The Market Forces of Demand...

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