Econ 202 1st Edition Lecture 6 Outline of Last Lecture I Market a Three different markets i Competitive Market ii Monopoly iii Oligopoly II Demand and Supply Outline of Current Lecture I Demand Schedule II How different factors affect demand III How prices affect demand IV How preferences affect the demand curve Current Lecture I Demand Schedule a Demand Schedule a table that shows Incom 20 000 40 000 the relationship between price and the e quantity demanded Prices Quantity Quantity b Demand Curve a graph of the Demande Demande relationship between price of a good and d d the quantity demanded 18 0 0 c Quantity Demanded the amount of a 15 0 6 good that buyers are willing and able to 12 6 12 purchase 10 10 16 d Demand depends on 1 price of a good 5 20 26 in this case pizza slices 2 income 3 0 30 36 prices of other goods 4 preferences and tastes i In order to see the effects of each of those factors we must change 1 of them and keep the rest constant ii D Demand curve 1 Point 1 Price 1 12 6 2 Point 2 Price 2 10 10 3 Point 3 Price 3 5 20 iii D1 The demand curve shift after the income increased 1 Point 1 P1 Q1 12 12 2 Point 2 P2 Q2 10 16 Figure 1 Graph of the Demand Curve as 3 Point 3 P3 Q3 5 26 Income Increases iv Interpretation of the curve 1 Vertical reading the graph vertically the demand curve identifies the highest price a person is willing to pay for a given quantity of the good 2 Horizontal reading the graph horizontally the demand curve identifies how much a person is willing to demand at a specific price II III How different factors affect demand curve a Income i Income increases Demand Shifts right normal good ii Income decreases Demand Shifts left inferior good b Other goods i Complement 1 Price of complement increases Demand shifts left 2 Price of complement decreases Demand shifts right ii Substitute 1 Price of substitute increases Demand shifts left 2 Price of substitute decreases Demand shifts right How prices affect demand demand curve a Using the table and the graph determine what would happen to the demand curve if prices increases or decreases b Using the table and the graph observe what happens to the demand increases or decreases i Prices of pizza slices increase from 10 dollars to 12 dollars What happens to the demand curve and the demand quantity 1 Prices increases nothing happens to the demand curve it does not shift 2 Prices increases Demand quantity would increase so the change would be along the original demand curve c Conclusion 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 Prices of Coffee IV i Change in the price of good Quantity demanded changes ii Change in other factors which affect demand Demand changes How preferences affect the demand curve a Graph on the right shows the preferences of Kyle s and Eric s Prefrences and the Demand Curve coffee prices and quantity 50 they would demand for that 45 price 40 b The orange lines The initial 35 30 price of coffee and the Kyle 25 quantity that Kyle demanded Eric 20 c The sky blue lines The initial 15 price of coffee and the 10 5 quantity that Eric demanded 0 d The purple line The increase 0 5 10 15 20 25 30 35 40 45 50 of the price of coffee and the Quantity Demanded of Coffee quantity that Kyle demanded e The tan lines The increase of the price of coffee and the quantity that Eric demanded f Since the gap or the difference between the orange line and the purple line on the x axis is wide that suggest that Kyle does not prefer coffee g On the other hand Since the gap or the difference between the sky blue line and the tan line on the x axis is not that far that suggest that Eric prefer coffee h The gaps are created due to the steepness of each demand curve i Final conclusion is that the steeper the demand curve the stronger the preference for the good i Steep demand curve strong preference for the good ii Steepness of the demand curve indicates the preference taste strength 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