lecture 3 handout - supply and demand

# lecture 3 handout - supply and demand - 1 The Linear Supply...

This preview shows pages 1–2. Sign up to view the full content.

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: 1 The Linear Supply and Demand Model The model is given by these demand and supply functions: = = + where are positive constants. and represent the sensitivity of quantity demanded and quantity supplied , respectively, to price . captures all factors besides price that a f ect quantity demanded, and captures all factors besides price that a f ect quantity supplied. In any model, we can divide the variables into two categories. Endogenous variables are those that were building the model to predict; theyre the outputs of the model. (The term means &quot;generated from within [the model].&quot;) In the supply and demand model, the endogenous variables are: , , and . Exogenous variables are those that we take as given and constant; theyre the inputs to the model. (The term means &quot;generated from outside [the model].&quot;) In the linear supply and demand model, the exogenous variables are: , , , and . 1.1 Equilibrium The system is in equilibrium when quantity demanded equals quantity sup- plied. We denote this equilibrium quantity by , and the equilibrium price that brings about this quantity demanded and quantity supplied by . By de f nition, solves: =...
View Full Document

## This note was uploaded on 04/07/2012 for the course ECON 3010 at Cornell University (Engineering School).

### Page1 / 3

lecture 3 handout - supply and demand - 1 The Linear Supply...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online