ECON1101 1st Edition Lecture 4Outline of Last Lecture I. Demand in Electricity Auctiona. Why bid at cost of production?b. Uniform price auctionII. Introduction to Supply and Demanda. Competitive Marketsb. Quantity Suppliedc. Quantity Demandedd. EquilibriumOutline of Current Lecture I. Supply and Demanda. Shiftingi. Law of Demandb. What Causes Shiftingi. Related Goodsii. Incomeiii. Number of Buyers/Consumer RatesCurrent LectureSupply/DemandIf 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 ShiftingII. 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 parallelb. An increase/decrease in demand without a change in priceThese 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.c. Every price level = more quantity demanded (or less)V. NOT shiftinga. Moving ALONG a curveb. Lowering ONLY the price will not cause a shiftc. Shifts are caused by factors that increase or decrease demand.VI. Law of Demanda. 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 likecheap 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.VII. What causes Shifting?a. Preference of consumerb. Price of the product and/or servicec. Income of the consumerd. Number of consumerse. Seasonal changef. Change in competitionVIII. Related Goodsa. Goods can either be SUBSTITUTES or COMPLEMENTSi. Substitutes replace ii. Complements go along withIX. Incomea. Increase purchase of valuable goods with higher income, decrease purchase of less valuable goods purchased with lower incomeb. Normal Good: an item such that when your income goes up, you purchase more. When your income goes down you buy less. i. Positive relationc. Inferior Good: an item such that when your income goes up, you buy less.X. Number of Buyersa. More buyers=more demandXI. Consumer ratesa. More preference for the item= more
View Full Document
Unlocking...