ECON 104 1st Edition Lecture 4 Outline of Last Lecture I Production Possibility Frontier PPF II Opportunity Cost III Assumptions of PPF IV Economic Growth Outline of Current Lecture II The Product Market III Law of demand IV The Law of Supply V Market Equilibrium Current Lecture I II The Product Market a Demand Curve Households purchase goods and services b Supply Curve Firms supply goods and services c Market Equilibrium Quantity demanded equals quantity supplied Law of demand a Law of Demand There is an inverse relation between the price of a good and quantity demanded i Ceteris Paribus all other things being held equal or constant 1 Only one thing can change at a time ii Quantity demanded What consumers are willing to by b A shift in demand occurs when there is a change in i The number of buyers ii Income iii Expectations of future prices iv 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 decrease 1 Normal goods a EX gas steak most goods 2 Inferior goods a Ramen bus fare d A change In demand 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 III IV i when the whole line shifts e a change in quantity demanded i when a point moves along the same line due to price The Law of Supply a 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 in i The number of firms in the market ii Prices of inputs iii Technological change iv Expected future prices c A change In supply i when the whole line shifts d a change in quantity supplied i when a point moves along the same line due to price Market Equilibrium a Market equilibrium occurs when quantity demanded quantity supplied b Surplus there is too much i There is more supplied than demanded c 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 up 2 Price goes up ii If there is an increase in supply 1 Quantity goes up 2 Price goes down
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