blanchard_ch03

Figure 32 illustrates an increase in demand when

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Unformatted text preview: changes, there is a change in demand. Figure 3.2 illustrates an increase in demand. When demand increases, the demand curve shifts rightward and the quantity demanded at each price is greater. For example, at $2.50 a bar, the quantity demanded on the original (blue) demand curve is 5 million energy bars a week. On the new (red) demand curve, at $2.50 a bar, the quantity demanded is 15 million bars a week. Look closely at the numbers in the table and check that the quantity demanded at each price is greater. The table shows a demand schedule for energy bars. At a price of 50¢ a bar, 22 million bars a week are demanded; at a price of $1.50 a bar, 10 million bars a week are demanded. The demand curve shows the relationship between quantity demanded and price, other things remaining the same. The demand curve slopes downward: As the price decreases, the quantity demanded increases. The demand curve can be read in two ways. For a given price, the demand curve tells us the quantity that people plan to buy. For example, at a price of $1.50 a bar, people plan to buy 10 million bars a week. For a given quantity, the demand curve tells us the maximum price that consumers are willing and able to pay for the last bar available. For example, the maximum price that consumers will pay for the 15 millionth bar is $1.00. animation 9160335_CH03_p053-080.qxd 6/22/09 8:56 AM Page 57 Demand An Increase in Demand Price (dollars per bar) FIGURE 3.2 Six main factors bring changes in demand. They are changes in 3.00 ■ ■ E 2.50 E' ■ ■ D 2.00 D' ■ ■ C 1.50 B' Demand for energy bars (original) 0.50 5 0 A Demand for energy bars (new) A' 10 25 30 15 20 35 Quantity demanded (millions of bars per week) Original demand schedule New demand schedule Original income New higher income Quantity demanded Price (dollars per bar) 0.50 22 B 1.00 C Quantity demanded Price (millions of bars per week) A (dollars per bar) (millions of bars per week) A' 0.50 32 15 B' 1.00 25 1.50 10 C' 1.50 20 D 2.00...
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This note was uploaded on 04/04/2012 for the course ECON 251 taught by Professor Blanchard during the Spring '08 term at Purdue.

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