Ch04 - CHAPTER 4 SUPPLY, DEMAND, AND MARKET EQUILIBRIUM 1....

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CHAPTER 4 SUPPLY, DEMAND, AND MARKET EQUILIBRIUM  1. Chapter Summary 2. Chapter Objectives 3. Chapter Outline Teaching Tips/Topics for Class Discussion 4. Extended Examples Extended Example 1:   Price of Coffee Extended Example 2:   Pesticides in the News 5. Problems And Discussion Questions 6. Model Answers to Questions:  Chapter Opening Questions Test Your Understanding Using the Tools 7. Economics Applied - Using What You’ve Learned 8. Economic Experiment: Market Equilibrium 1. Chapter Summary  Chapter 4 introduces demand, supply and their determinants. Price changes move quantity demanded or supplied up or down along the curves; changes in the determinants of demand (income, price of related goods, population, tastes, consumer price expectations) or supply (input costs, technology, number of firms, producer price expectations) shift the related curve. Market equilibrium is achieved when quantity demanded equals quantity supplied at a given price; there is no shortage or surplus. Shifts in demand or supply change market equilibrium. Demand shifts cause price and quantity to change in the same direction, while supply shifts cause price and quantity to move in opposite directions. This information allows us to understand real-world price or quantity movements. For example, lower prices associated with lower quantities must be the result of a demand decrease, not a supply increase. 2. Chapter Objectives 1. The supply of electricity generated from wind power doubled in 2001. Why? 2. Ted Koppel, host of the ABC news program, Nightline , once suggested that the prices of illegal drugs have fallen because the supply of illegal drugs increased. Was he correct? 3. Over the last few decades, the consumption of chicken and turkey has increased. Why? 4. You shop for groceries at a different store each week. At each store, the clerk says "You saved $12 by shopping here instead of a another store" Is it possible to save money wherever you go? 31
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32 Chapter 4 3. Chapter Outline I. The Demand Curve 1. A consumer who is “willing to buy” will give up enough money to purchase a good. 2. Consumers “want” or “desire” many goods, but are not necessarily willing to give up money to get them. 3. Demand is defined for a specific time period (day, week, year, etc.). 4. Variables that affect individual consumer decisions a. The price of the product b. Consumer income c. The price of related (substitute or complementary) goods d. Consumer tastes and advertising e. Consumer expectations about future prices A. The Individual Demand Curve and the Law of Demand 1. The individual demand curve shows the relationship between the price of the good and the quantity that a consumer is willing to buy during a particular time period, holding all other variables constant. To construct a demand curve, we use the data shown in a demand schedule , which contains, for each price, the quantity that a consumer is willing
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This note was uploaded on 04/07/2008 for the course ECON 201 taught by Professor Wadell during the Spring '08 term at University of Oregon.

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Ch04 - CHAPTER 4 SUPPLY, DEMAND, AND MARKET EQUILIBRIUM 1....

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