Chelsea Katz 1 31 13 ECON200 Market Supply Demand Notes All Simulations on Aplia Demand o Change in Quantity Demanded MOVEMENT ALONG A DEMAND CURVE CAN ONLY BE CHANGED BY A CHANGE IN THE PRICE OF THE GOOD vs Change in Demand RELATIONSHIP BTWN PRICE QUANTITY HAS NOT SHIFTED increase in demand at every price people want to buy more of the good demand curve shifts to the right decrease in demand at every price people want to buy less of the good demand curve shifts to the left What causes an increase decrease in demand income Normal good good for which other things being equal an increase in income leads to an increase in demand or decrease in income leads to a decrease in demand Inferior good good for which other things being equal an increase in income leads to a decrease in demand and a decrease in income leads to an increase in demand Exceptions where income demand move in opposite directions bus tickets income rises and demand decreases generic prescriptions used goods thrift shops motel rooms Changes in prices of other goods could change demand Substitutes when a rise in price of one good increases the demand for another good the two goods are called substitutes ex tea coffee if the price of tea goes down some people would shift to tea from coffee Pepsi Coca Cola Complements when a fall in the price of one good raises the demand for another good the two goods are called complements ex if price of DVD players go down people would buy more DVDS demand for DVDs would go up or Peanut butter jelly bagels cream cheese o Law of Demand a claim that other things being equal the quantity demanded of a good falls when the price of the good rises Tells us demand curve MUST be negatively sloped high prices low demand low prices high demand Ex people use less gas when the price goes up o Goods with snob appeal are example of violation of law of demand designer clothes etc o Goods that seem like violations of the law of demand housing prices of homes fell about 1 3 and records were set for fewest number of home sold in decades b c their expectations were that prices would drop even lower Changes in taste can lead to a change in demand Supply Bringing Supply Demand Together
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