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Lecture 1 - Goals 3 Groups That We Will Be Studying 1...

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Goals 3 Groups That We Will Be Studying 1. Consumers 2. Firms 3. Government Demand/Supply Curves, Market Equilibrium, Analysis Motivating Example: Oil Shock in 1970s—High Oil prices in 2000s When we compare the two, we see very similar things going on (high oil prices), What’s the difference? In the 1970s, OPEC didn’t export as much as we wanted. (Low Supply) Today, the high price comes from the high demand (i.e. China’s Industrialization takes a lot of oil, and so do SUVs). (High Demand) Demand Quantity demanded is the amount of a good that buyers are willing and able to purchase. (i.e. iPods—I may want three iPods, but I can’t afford three.) Law of Demand states that, other things equal , the quantity demanded of a good falls when the price of the good rises. ( Ceribus Paribus ) The Demand Curve is a graph of the relationship between the price of a good and the quantity demanded. The y-axis affects the x-axis when referring to the demand curve. It’s the opposite of math graphs. (Our graphs in Econ are wrong mathematically.) The x-axis is Quantity Demanded, and the y-axis is Price.
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