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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.
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.
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.
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
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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Econ_100_Ch2Part1 - ECON 100 Introduction to Microeconomic...

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