CH3_ECON2301 - Macroeconomics ECON 2301 Spring 2009 Marilyn...

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Unformatted text preview: Macroeconomics ECON 2301 Spring 2009 Marilyn Spencer, Ph.D. Professor of Economics Chapter 3 Chapter 3: Supply & Demand Markets ✔ Markets ➜ Arrangements that individuals have for exchanging with one another ➜ Represent the interaction of buyers and sellers for goods and services ➜ Markets set the prices we pay and receive. Examples: • Automobile market • Health care market • Labor market • Stock market The Law of Demand ✔ Demand ➜ how much of a good or service people will purchase at any price during a specified time period, other things being constant (ceteris paribus) The Law of Demand ✔ Law of Demand ➜ Quantity demanded is inversely related to price, holding other factors constant. • Price Q d • Price Q d The Demand Schedule ✔ The demand schedule ➜ Table relating prices to quantity demanded ➜ We must consider • Time dimension • Constant-quality units ✔ Demand Curve ➜ A graphical representation of the demand schedule ➜ Negatively sloped line showing inverse relationship between price and quantity demanded, all else equal Figure 3-1 The Individual Demand Schedule and the Individual Demand Curve, Panel (b) The Law of Demand (cont'd) ✔ What are we holding constant? ➜ Income ➜ Tastes and preferences ➜ Price of other goods ➜ Expectations ➜ Many other factors Shifts in Demand ✔ Scenario ➜ Imagine the federal government gives every...
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CH3_ECON2301 - Macroeconomics ECON 2301 Spring 2009 Marilyn...

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