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UGA ECON 2105 - Supply and Demand Model
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ECON 2105 1nd Edition Lecture 1 Outline of Current Lecture (Module 5) I. Supply and Demand Model II. HousingCurrent LectureI. Supply and Demand Model - Price- interest rate, wages, federal funds rate, short/long term interest rate- Quantity- labor amount, outputs (US GDP), credits (funds) - There is a relationship between supply and demand What is a demand curve? - At different prices how much are consumers demanding?- Function, relationship between price of product and the quantity demanded. - Demand curves usually have a negative slope depending on elasticity of theproduct Change in Demand- (shifting of a graph) anything other than price related. Ex. Increase in salary Change in Quantity Demanded- price related, movement along the curve Why is the demand curve downward sloping? - Law of demand- there is a negative relationship between the price of the product and the quantity demanded o P=$2.00  200 units o P=$1.00  400 units Increase in demand is a rightward shift What should make you willing to pay higher prices for IPhone for the same quantity?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.- Income, value up, popularity up, preferred, taste, another product substitutable went up in price making IPhone a better choice, scarcity, expectations, number of consumers, social media (shifting factors in demand curve) Fall in the price of muffins; consumers are LESS willing to buy donuts.Fall in the price of coffee milk; consumers are MORE willing to buy coffee. - 2 goods are substitutes if a decrease in the price of one leads to a decrease in demand for the other. Ex. IPhone/Galaxy - 2 goods are compliments if a decrease in the price of one good leads to an increase the other will also. Ex. Shampoo/Conditioner If the interest rates on bonds rise, what will happen to stock market prices? –they will go down (demand for stocks down  stock prices will go down) (demand for bonds goes up  bond prices will go up) - Inferior good= demand decreases when income increases - Normal good= demand goes up when income goes up Changes in Expectation- if Xbox prices are expected to drop in December, what will happen to sales in November? Sales will drop in November. II. Housing - As buyers expected housing prices to increase in the future, people purchase more homes today causing prices to increase (self fulfilling prophecy)- As homebuyers expected housing prices to fall they lower their demand for housing today causing prices to fall (self fulfilling


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