ECON1101 1st Edition Lecture 4 Outline of Last Lecture I Demand in Electricity Auction a Why bid at cost of production b Uniform price auction II Introduction to Supply and Demand a Competitive Markets b Quantity Supplied c Quantity Demanded d Equilibrium Outline of Current Lecture I Supply and Demand a Shifting i Law of Demand b What Causes Shifting i Related Goods ii Income iii Number of Buyers Consumer Rates Current Lecture Supply Demand If the price is 3 00 and demand is 2 units but 6 are supplied there is a SURPLUS This drives sellers to lower the price to get buyers to buy They lower the price enough to reach an equilibrium On the flipside if the price is 1 00 and the demand is 6 units and the supplied amount is 2 unites there is a SHORTAGE Supply and Demand Shifting II Assume the market is in equilibrium III Look for how the market price and quantity change when the market fundamentals change IV What is a shift a A demand curve moving parallel b An increase decrease in demand without a change in 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 V VI VII VIII IX X XI c Every price level more quantity demanded or less NOT shifting a Moving ALONG a curve b Lowering ONLY the price will not cause a shift c Shifts are caused by factors that increase or decrease demand Law of Demand a Lawn that governs demand curve price is low then the demand is low price is high then the demand is high b Inverse relationship between price and quantity demanded Basically people like cheap stuff which is also the reason the demand curve is downward sloping c When it is not a shift it is most likely a movement on the existing curve What causes Shifting a Preference of consumer b Price of the product and or service c Income of the consumer d Number of consumers e Seasonal change f Change in competition Related Goods a Goods can either be SUBSTITUTES or COMPLEMENTS i Substitutes replace ii Complements go along with Income a Increase purchase of valuable goods with higher income decrease purchase of less valuable goods purchased with lower income b Normal Good an item such that when your income goes up you purchase more When your income goes down you buy less i Positive relation c Inferior Good an item such that when your income goes up you buy less Number of Buyers a More buyers more demand Consumer rates a More preference for the item more demand
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