ECO-9-10-Week-3 - ECONOMICS:ClassNotesWeek3 Chapter3Forwhom...

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ECONOMICS: Class Notes Week 3 10/09/2007 10:36:00 Chapter 3               For whom? Supply and Demand are not real. They are abstract constructs, used to explain things There is no supply or demand, there are people doing things. Supply and Demand is how people go about provisioning themselves with the  material means of existence. Market Exchange:  There are 2 parties.  Both parties are buying and selling at  the same time. Gas Station: You sell the gas station your dollars, they sell you their gas.  Both sides sell and buy at every transaction. Demand The ability  and  willingness to purchase a good or service at  various  prices.  The buying side of the market is the side that wants to buy the good or  service who is also looking to sell money. Price of the good or service itself does not determine the demand. Quantity Demanded Amount of a good or service that people are  willing  or  able  to purchase at a  specific  price.  Quantity demanded for the good or service is a function of the prices of the  good or service itself. o Change in the price will cause a change in Q(demanded).  But not the  other way.
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Q(d) = ƒ(P Reserve Price:  The maximum price someone is  willing  and  able  to pay for a  good or service. Above that price the quantity demand becomes 0. Determinants of Demand Income o Normal Good:  suppose your income increases.  Everything else held  constant, your willingness to buy them increases. o Inferior Good:  Suppose your income increases.  Everything else held  constant, your willingness to buy them decreases. Price of other goods or services o Substitutes:  ( OR )   One  or  the other. Paper or plastics. If the price of one increases.  Everything else held       constant, then the demand for the other will increase.   Relatively Cheaper o Complements:  ( AND )   One  and  the other.  Goods that are consumed  together. Peanut Butter And Jelly
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This note was uploaded on 01/16/2012 for the course ECON 2000 taught by Professor Roussell during the Fall '06 term at LSU.

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ECO-9-10-Week-3 - ECONOMICS:ClassNotesWeek3 Chapter3Forwhom...

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