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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