ECON 203 1nd Edition Lecture 4Outline of Last Lecture I.consumer demand cont.a.principle of diminishing marginal valueb.first law of demandi.centaris paribus conditionsOutline of Current Lecture I. consumer demand cont.a. demand curve shiftsb. ceteris paribus conditions effect on demand curvei. incomeii. price of goodsiii. all other “x-vectors”II. SupplyCurrent LectureI. consumer demand cont.a. demand curve shifts- any change in the ceteris paribus conditions will cause a shifting of the entire demand curve. this depicts an increase in demand. The same price for the good originally had a quantity demand of Qu, now the quantity demand has increased to Qi. 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.this depicts a decrease in demand. The same price for the good originally had a quantity demand of Qu, but has now fallen to Qi. Note: anything that causes the consumer to see more value in a good than before will increase demand. Anything that causes the consumer to see less value in a good than before will decrease demand.b. Ceteris paribus conditions effect on demand curve:i. income- an increase in income will increase the demand with normal goods, whereas a decrease in income will decrease the demand with normal goods.A decrease in income will increase the demand with inferior goods, whereas an increase in income will decrease the demand with inferior goods.i. Prices of related goods- 1. substitute goods are when the price of good x changes, the demand for good y changes in the same way. (i.e. when Coke prices rise, the demand for the cheaper product of Pepsi would increase)2. compliment goods are when the price of good x changes, the demand for good y changes in the opposite direction(i.e. when the price of a burger increases, the quantity demand for fries will decrease)ii. all other “x-vector” conditions1. weather (if it’s currently raining, the demand for umbrellas increases)2. season(if it’s currently cold, the demand for winter jackets increases)3. taste/preference4. information(if I know something is bad for me, my demand for that product will decrease)5. expectation of future prices( if the price of gas will be cheaper next week, I will hold out and get gas next week, not now)III. Supplya. Assert decision rule( decision rule for producers)- do not make units that cost more to make than you collect for profit. Producers are always searching for the lowest cost to create
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