Econ 202 1st Edition Lecture 8 Outline of Last Lecture I Demand Schedule II How different factors affect demand III How prices affect demand IV How preferences affect the demand curve Outline of Current Lecture I Adding market demand II What causes the market demand curve to shift III Firms supply and what affects it IV Supply curve V Supply curve shift Current Lecture I Adding market demand a Market demand curve is adding up the demand curve of everyone in a market i add the curves horizontally 1 Ex Pizza slices a Market demand Eric s Quantity Kyle s Quantity b Prices are fixed Price Eric Kyle Market Quantity Quantity Eric s Demand Curve s Kyle s Demand CurveDemandMarket Demand Curve 20 15 0 20 1 1 6 10 4 10 105 6 16 5 10 0 5 10 15 20 25 30 Quantity 15 0 5 20 0 30 0 5 10 15 20 25 30 11 31 16 46 Quantity Price 12 10 0 20 15 Price Price 15 10 5 0 0 5 10 15 20 25 30 Quantity II What causes the market demand curve to shift a Everything that causes individual demand curves to shift i Income price of substitutes and complements preferences b Number of consumers c Distribution of income III Firms supply and what affects it a Firms supply part of the circular flow model i Ex quantity slices of pizza firm Pizza Casbah place supplies pizza b What affects the supply and demand i Important terms 1 Economic Profit what you make revenue economic cost 2 Economic cost what you spend 3 Revenue price of goods amount sold ii The factors 1 Price of the commodity a Quantity of supply increases price of pizza increase b Law of supply the claim that with other factors being equal the quantity of supplied of a good increases when the price of the good increases 2 Prices of inputs a Price of input increases quantity supply decreases 3 Technology a Increase in better technology quantity supply increases IV Supply curve 16 Price Quantity of cheese 14 12 15 1500 10 900 5 300 2 5 0 Price 10 8 6 4 2 0 0 500 1000 1500 Quantity of0cheese 0 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 V a Ceteris Paribas assumption have fixed technology and prices of inputs b Interpretation of curve i Vertical The supply curve identifies the minimum price the firm is willing to accept to supply a given quantity ii Horizontal quantity the firm is willing to supply for at a given price Supply curve shift a Supply curve can shift to multiple factors and they are i Change in technology 1 Better technology price change ii Change in consumer s income 1 More income a consumer has the more they can afford a product iii Change in production cost 1 Change in the prices of input products a Ex to make ice cream you need sugar input product if the price of sugar decreases the quantity of ice cream would increase 2 the less something cost the more you produce and that leads the curve to shift right 3 the more a product cost limits the quantity and that leads the supply curve to shift left iv Taxes and subsides 1 More taxes on a product an increase in production cost a decrease in supply produce less of the product 2 More taxes on a product an increase in its cost a less likelihood of it to be bought consumers will buy less of it a drop in supply 3 Subsidies a reduced cost less production cost more supply a supply curve shift to the right 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