Econ 1201 1st Edition Lecture 3Outline of Last Lecture I. Choice and Opportunity CostII. Comparative AdvantageIII. Economy’s Production PossibilitiesOutline of Current LectureII. Last lecture continued (Economic Systems)III. Demand (& changes in demand)IV. Supply (& changes in supply)Current Lecture:I. Chapter Two – Economic Systems - There are two questions every economic system has to ask: - 1) What is produced? 2) How is it produced, 3) For whom is it produced?- The systems exist on a spectrum from communism <------------> capitalism * There are also economies based on religion * Communism CommandEconomySocialism MixedEconomiesCapitalism- Decisions madeand resources owned at community level Ex. Think of a family where all the decisions made are balanced and choresare done equally by each member- In bigger systems (countries), therehas to be some type of leader trying to replicate communist decisionsEx. North Korea- Labor is not communally owned but resources and capital are - Many economies fit under this category (including the US)- Everything is decided in markets  this can lead to problems because if you you’re born with no money, you could end up stuck in that positionThese 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.- Advantage: can work hard to achieve what you want “American Dream”MarketsII. Demand- Households: demand goods and services- Firms: demand resourcesLaw of demand: When price goes down, quantity demanded goes up (Note: this is quantity demanded NOT demand)- At a lower price, people want more- Inverse relationship between price and quantity  downward slope of demand curveCauses for change in demand/shift in demand curve:- Consumer Incomeo For normal goods, if income goes up, demand goes up- Price of related goodso If the price of the substitute increases, demand for the good increaseso Quantity demanded of the substitute decreases - Changes in consumer tasteo Due to marketing (A beer commercial can make you think you will attract more women, demand shifts right)o Something goes out of style, demand for that product shifts left- Changes in consumer expectationso If oil prices are expected to increase, consumers will stock up now (demand increases)o If a big storm is coming, everyone goes to the store to buy water (demand for water increases)- Change in composition of consumerso If population is aging, demand for a popular cd from their youth will decrease*** REMEMBER: price does not shif demand!!! ***III. Supply- Change in quantity supplied is caused by change in priceo As price increases, quantity supplied also increaseso Ex. The higher the wage, more likely to supply laborChanges in Supply:- Advances in technology- Price of resourceso If price of labor increases, supply will shift left because you will not be able pay as many workers, so you will not be able to make as much money, so you will not want to sell as much- Price of other goods that use the same resources- Producer expectationso Willingness to Accept: price that you will sell for (or