ECON 102 1st Edition Lecture 5 Outline of Last Lecture I Comparative Advantage Vs Absolute Advantage II Two Simple but important models Cont a Circular flow diagram III Differences between Positive and Negative Economics Outline of Current Lecture 1 Competitive Market 2 Laws of Demand a Things that Remain Constant i Prices of Related Goods ii Incomes b Demand Curve Current Lecture Competitive Market o Many buyers and sellers o Same goods or services o Demand Schedules show how much a specific good or service consumers will want to buy at different prices Laws of Demand o As Price rises Quantity drops o As Price drops Quantity rises o Other things remain constant Prices of related goods Incomes Tastes and Preferences For fashionable items iPods Vans PS3 taste among consumers is more likely to fluctuate then with items to survive Changes in Expectations If someone starts that all the gas in the world is running out consumers will expect to run out of gas so they will buy more Demand Curve A graphical representation of the law of demand it slopes downward o Movement along the demand curve 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 A change in price is represented by movements along the demand curve Demand is still the same but the quantity demanded changes as the price changes o Shifts in demand curve A shift of the demand curve will occur either to the right or left when anything other than the price of the good has changed These factors do not show what is happening on the curve o An increase in population and other factors generate an increase in demand A rise in the quantity demanded at an given price o An increase in demand means a rightward shift of the demand curve Changes in the Prices of Related Goods o Substitutes Two goods are substitutes if a fall in the price of one of the goods makes consumers less willing to but the other good o Compliments Two goods are complements if a fall in the price of one good makes people more willing to buy the other good Changes in Income o Normal Goods When a rise in income increases the demand for a good the normal case we say that the good is a normal good o Inferior Goods When a rise in income decreases the demand for a good it is an inferior good Individual Demand Curve and the Market Demand Curve o The market demand curve is the horizontal sum of the individual demand
View Full Document
Unlocking...