Economics_Ch06

# Do you buy and pay for things that you are unaware of

This preview shows page 1. Sign up to view the full content.

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

Unformatted text preview: is anything for you that is similar to what the house was for the man. Do you buy and pay for things that you are unaware of? If you ever paid more for designer jeans than for the identical (and it must truly be “identical”) nondesigner jeans, then the price difference is what you paid for the name on the back of the jeans. If you ever paid more for Bayer aspirin than for generic aspirin, then the price difference is what To find the quantity supplied at \$15, again start at the price of \$15 on the vertical axis, and follow the dotted horizontal line over to the supply curve (S). Then follow the dotted vertical line downward to the horizontal axis. The number here is 150, so the quantity supplied at \$15 is 150. you paid for the name “Bayer.” We are not urging you to stop buying designer jeans or Bayer aspirin. Similarly, we are not saying that it is somehow wrong to buy a house with an ocean view. We are simply pointing out what it is you are paying for. THINK ABOUT IT People who reside in good climate locales often talk about the good climate being “free.” Someone might say, “Aren’t we lucky to live here? And to think, we don’t have to pay a penny for all this good weather.” Is it true that they don’t pay for the “good weather”? So, at \$15, does a surplus or a shortage occur? Because the quantity supplied (150) is greater than the quantity demanded (50), the result is a surplus. Now let’s look at some graphs to see what happens when either supply or demand changes. Section 1 Supply and Demand Together 133 06 (128-153) EMC Chap 06 11/21/05 3:13 PM Page 134 Demand Changes Cause Changes to Equilibrium Price Exhibit 6-3(a) below shows the demand for and supply of television sets. The original demand curve is D1, the supply curve is S1, equilibrium is at point 1, and the equilibrium price is \$300. Now suppose the demand for television sets increases. (Recall from Chapter 4 the factors that can shift the demand curve for a good: income, preferences, prices of re...
View Full Document

## This document was uploaded on 01/16/2014.

Ask a homework question - tutors are online