ECON 201 1st Edition Lecture 2I. Continuing from Thursday’s LectureA.) Changes in Demand1. Preferences/ Tastes 2. Relative prices for other goodsa. Choice of what movie to go to, restaurant, foodb. Should I work or not? c. View college as being relatively cheaper compared to going to work with a high school degree 3. Income a. The only things that affect consumers is customer preferences, relative prices of other goods, and income b. If a good is “normal,” then demand rises as incomes risec. If a good is “inferior,” then the demand falls as income risesd. As consumers income rises they are more willing to buy a goode. As income rises and it’s a normal good, then demand rises and shifts to the rightf. Shift to the right if it’s a normal good, or left if its an inferior good4. Suppose the price of “other” goods rises, like the price of UC Universitiesa. As the price of UC schools goes up, the demand for UO enrollment goes upb. If an increase in the price of one good, causes an increase in demand for another, we call these goods “substitutes” c. If raised the price on textbooks for this class, the likeliness of taking this class compared to another is much lowerd. If an increase in the price of one good causes a reduction in the demand for another, we call these goods “complements” e. The increase in price of gasoline, caused an increase in demand for electrical cars II. Supply A.) Market Supply – is the maximum firms are willing and able to supply at any given price.1. Law of Supplya. At higher pries, forms are willing and able to supply a larger quantity to the marketb. Supply curves (for this class) are always upward sloping2. Changes In Supplya. “Determinants” b. Technology – Costs!! c. What determines my ability to supply to the market at any given price? These notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.d. As price goes up, farmers would be more willing to dedicate more of their land to that good (corn/wheat) e. Use of DDT – can’t use the pesticide, reduction is supply (shift left means reduction)f. EX: Corn – expect next year wheat prices are going to be high. Do you plant wheat or corn? Corng. Opportunity Cost – is the value of the next best option forgoneh. Willingness to supply is opportunity cost 3. Technology, ability to produce, and opportunity to produceIII. Equilibrium A.) Market Equilibrium – a position of rest given market forces; Market Equilibrium is a price such that no agent in the market place has an incentive to change their behavior 1. Firms put objects on sale if no one is willing to buy the product a. Lower prices to try and sell b. At lower prices consumers are willing and able to buy morec. Want tickets for the Duck game and you are willing and able to pay a higher price for the tickets you bid up the price (not going to sell unless get a higher price) 2. The equilibrium price is the price that equates the quantity supplied and quantity demandeda. Everyone who wants the good at the equilibrium price, gets itb. Price at which, everyone who wants to buy it can find a supplier that is willing tosell it for that price c. Perfectly competitive market – have the ability to bid up the prices and naturallyachieve a higher point 3. Once you understand what suppliers and consumers are willing to do, you can predict how much will be sold and at what