ECON 1100 1nd Edition Lecture 6 Outline of Last Lecture I.Demand CurveOutline of Current Lecture I.AOLII.Review Demand CurveIII.Supply CurveCurrent LectureI. AOLA company that was important in the beginnings of internet and why they failed. He explained that when they reduced to price to $50/month w/o a fee/min the demand skyrocketed and people eventually could not get on because others were constantly on. This was a dial-up system. Reason to the company’s failure, or one of, is that they did not think aboutthe demand curve and that by eliminating the fee/min they would significantly or even exponentially increase the quantity demanded. When people wanted internet and could not geton they switched companies eliminating the great power AOL had. Thus demand curves are very important to look at and understand no matter what kind of economics one is going on to study. II. Review Demand CurveSaid to be marginal maximum because the graph starts at the maximal price that an individual is willing to pay for a product and moves on to 0P & Q move in opposite directions; if price rises then the quantity demanded decreases, and vice versaExample graph shows movement down the demand curve; price dropped & quantity demandedincreases as a result 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.Demand shifter – anything that will affect consumer’s willingness to pay:Price of other goodsComplements – what comes along w/ the initial goodSupplements – alternativesIncome or wealth (monthly money or money had at set time)More $ usually means more willing to pay for goodsNormal goods – income increases, thus more willing to pay for goodInferior goods – income increases, thus less willing to pay for goodNumber of buyersTastes/preferencesIn this, the economists don’t care what they are, they are simply analyzing how they affect the person’s wiliness to buy a productExpectations about future price, income, etcIf a consumer thinks the price will decrease they will wait to buy the item,if they think the price will increase they will buy the item at the timeThis is what the stock market is based on, people’s beliefs about the future, always possibility of being wrongShifts of demand curve Increase the demand and line will move rightDecrease the demand and like will move leftIII. Supply CurveWhen below supply curve, it’s the $ used to produceWhen above supply curve, it’s the $ made off of productLooking at the 2 points that cross the line, if the production costs more than where the two meet then the producer is losing moneyMistakes in our speakingCost of item = productionPrice of item = how much we payMoving from the 1st to 2nd point is movement along the curve, so if price increases, so does supply because less people are buyingShift of the curve is affected by marginal costSupply shiftersPrice of inputs (labor, capital, land)Technology – knowledge about how to turn an input into an outputSubstitute in production – production price of item A vs. item
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