ECON 104 1st Edition Lecture 4 Outline of Last Lecture I. Production Possibility Frontier (PPF)II. Opportunity CostIII. Assumptions of PPFIV. Economic GrowthOutline of Current Lecture II. The Product MarketIII. Law of demandIV. The Law of SupplyV. Market EquilibriumCurrent LectureI. The Product Marketa. Demand Curve: Households purchase goods and servicesb. Supply Curve: Firms supply goods and servicesc. Market Equilibrium: Quantity demanded equals quantity suppliedII. Law of demanda. Law of Demand: There is an inverse relation between the price of a good and quantity demandedi. Ceteris Paribus: all other things being held equal or constant 1. Only one thing can change at a timeii. Quantity demanded: What consumers are willing to byb. A shift in demand occurs when there is a change in:i. The number of buyersii. Incomeiii. Expectations of future pricesiv. Taste and preferences: “trend”c. A shift in demand due to an increase in income i. The demand of normal goods will increase while the demand of inferior goods will decrease1. Normal goodsa. EX: gas, steak, most goods2. Inferior goodsa. Ramen, bus fared. A change In demandThese 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.i. when the whole line shifts e. a change in quantity demanded i. when a point moves along the same line due to priceIII. The Law of Supplya. The Law of Supply: There is a direct relation between the price of a good and the quantity sellers (firms) are willing to offer for sale i. Ceteris Paribus must still occur b. A shift in supply occurs when there is a change ini. The number of firms in the market ii. Prices of inputsiii. Technological change iv. Expected future prices c. A change In supplyi. when the whole line shifts d. a change in quantity suppliedi. when a point moves along the same line due to priceIV. Market Equilibrium a. Market equilibrium occurs when quantity demanded = quantity suppliedb. Surplus: there is too muchi. There is more supplied than demandedc. Shortage: Too little i. There is more demanded d. When there is a surplus or shortage the market will try and go back to equilibrium.i. If there is an increase in demand:1. Quantity goes up2. Price goes upii. If there is an increase in supply:1. Quantity goes up2. Price goes
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