LECTURE 9.27 SUPPLY AND DEMAND

LECTURE 9.27 SUPPLY AND DEMAND - Lecture 5: SUPPLY AND...

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Lecture 5: SUPPLY AND DEMAND 9/27/11 Price and Demand o Non-price determinants of demand. A change in these conditions will result in a change in demand: Number of buyers Consumer incomes Tastes and preferences Price of related goods Complements – two goods that are used together o When prices of a product declines, demand for its complement will rise o As price of product rises, demand for its complement will decrease Substitutes – a good that can be used in place of another o When prices of a product declines, demand for its substitute will decrease o As price of a product rises, demand for its substitute will rise Fads Expectations of consumers regarding future prices and income Price elasticity of demand – measure of consumer responsiveness to price If demand is elastic, consumers will buy only if price is low, greater reduction in price, the more consumers will buy If demand is inelastic, consumers will buy regardless of the price
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This note was uploaded on 02/23/2012 for the course ECON 162 taught by Professor Mammen during the Fall '12 term at UMass (Amherst).

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LECTURE 9.27 SUPPLY AND DEMAND - Lecture 5: SUPPLY AND...

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