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Example if people expect their incomes to rise their

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Example: If people expect their incomes to rise, their demand for meals at expensive restaurants may increase.
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*The variables above are called ‘shifters’. These are factors other than the price of the good, they shift the demand curve either to the left or right. Whereas, if there is just a change in price then there is a movement along the curve. - Movement along the demand curve: A change in quantity demanded (The factor that affects this, is a change in the price of this good) - Shift in demand curve: A change in demand (The factors that affect this, are the shifters in the table above). Determination of Price and Quantity 1) Consumers: They control the demand curve 2) Producers: They control the supply curve 3) Interaction: The interaction between supply and demand is the equilibrium . Q: Can a demand curve be positively sloped? (As price increases, quantity demanded increases) A: No.
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SUPPLY -The quantity supplied of any good is the amount that sellers are willing and able to sell. - Law of supply: the claim that the quantity supplied of a good rises when the price of the good rises, other things equal. - Supply schedule: A table that shows the relationship between the price of a good and the quantity supplied. Example: Starbuck’s supply of latte’s (Notice that Starbuck’s supply schedule obeys the Law of Supply) Market Supply vs. Individual Supply - The quantity supplied in the market is the sum of the quantities supplied by all sellers at each price. - Suppose Starbucks and Jitters are the only two sellers in this market
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CHANGES THAT SHIFT THE SUPPLY CURVE: Note: Movement along the supply curve= A change in quantity supplied (Caused by a change in price of the product) -The supply curve shows how price affects quantity supplied, other things being equal. - These “other things” are non-price determinants of supply. - Changes in these “other things” shift the Supply curve 1. Input Prices -Examples of input prices: wages, price of raw materials - A fall in input prices makes production more profitable at each output price, so firms supply a larger quantity at each price, and the Supply curve shifts to the right. 2. Technology - Technology determines how much inputs are required to produce a unit of output - A cost saving technological improvement has the same effect as a fall in input prices= Shifts the supply curve to the right. 3. Number of Sellers - An increase in the number of sellers increases the quantity supplied at each price= Shifts supply curve to the right 4. Expectations - Example: Events in the middle east lead to expectations of higher oil prices - In response owners in Texas oilfields reduce supply now, save some inventory to sell later at the higher price= Supply curve shifts to the left - In general, sellers may adjust supply when their expectations about future prices changes (if the good is not perishable)
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EXAMPLE: Draw a supply curve for tax return preparation software. What happens to it in each of the following scenarios?
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