Econ_100_Ch2Part1

Econ_100_Ch2Part1 - ECON 100: Introduction to Microeconomic...

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Slide 1 of 55 ECON 100: Introduction to Microeconomic Theory Lecture 3 Yilan Xu
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Slide 2 of 55 Introduction The model of supply and demand is one of the most important tools in economics. The model is a simple presentation of exchange that captures the behavior of both buyers and sellers.
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Slide 3 of 55 The Demand Curve for Oil Demand represents the behavior of buyers. A Demand Curve is a function that shows the quantity demanded at different prices. § The Quantity Demanded is the quantity that buyers are willing and able to purchase at a particular price.
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Slide 4 of 55 The Demand Curve for Oil The Law of Demand indicates an inverse relationship between price and quantity demanded. § When price rises, all else equal, quantity demanded falls. § When price falls, all else equal, quantity demanded rises. Demand curves consistent with the law of demand are downward sloping.
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Slide 5 of 55 Demand Curves The Demand Curve for Oil is a Function Showing the Quantity of Oil Demanded at Different Prices Price of Oil per Barrel Quantity of Oil (MBD) $55 $5 $20 5 50 25 Demand Price Quantity Demanded $55 5 $20 25 $5 50
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Slide 6 of 55 Demand Curves Demand curves can be read in two ways: § Horizontally: How much buyers are willing and able to purchase at a given price. § Vertically: The maximum price for which buyers are willing to pay for a given quantity. Demand curves thus reveal the quantity demanded at a given price or the maximum willingness to pay for a given quantity.
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Slide 7 of 55 The Demand Curve for Oil Horizontal Reading Price of Oil per Barrel Quantity of Oil (MBD) Start End $55 $5 $20 5 50 25 Demand
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Slide 8 of 55 The Demand Curve for Oil Vertical Reading Price of Oil per Barrel Quantity of Oil (MBD) End Start $55 $5 $20 5 50 25 Demand
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Slide 9 of 55 Demand Curves Why is the demand curve downward sloping ? § A good is not equally valuable in all of its
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This note was uploaded on 02/17/2012 for the course ECON 0100 taught by Professor Kenkel during the Spring '08 term at Pittsburgh.

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Econ_100_Ch2Part1 - ECON 100: Introduction to Microeconomic...

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