ECON201
CHAPTER 3: Demand, Supply, and Price
-The tot. amount of any particular good or service that consumers want to purchase during a
period of time is called the quantity demanded.
-The amount that consumers want to purchase may exceed the amount they actually
purchase.(when quantities not available).= quantity bought or exchanged
-What influences a consumer's want:
1. Product’s price (not the important cause of shifts in demand curve)
2. Consumer’s income
3. Prices of other products
4. Consumer’s preferences
5. Population (increase in pop. increases demand)
6. Significant changes in the weather (cold winter=electricty)
***Holding all other variables constant is often described by the expressions “other things being
equal,” “other things given,” or the equivalent Latin phrase, ceteris paribus.
Flow VS. Stock
A variable that has a time dimension (100L/min)
A variable has a meaning at a specific time (300 eggs sold on sept. 12, 2020)
Demand and Price:
=A basic economic hypothesis is that the price of a product and the quantity demanded are
related negatively, other things being equal. That is, the lower the price, the higher the quantity
demanded; the higher the price, the lower the quantity demanded.
Ceteris paribus:
- Price ↑ demand ↓
- Price ↓ demand ↑
Demand Schedules and Curves:
Schedule=table
,Demand curve= represents the relationship between quantity demanded and price, other things
being equal; its negative slope indicates that quantity demanded increases when price
decreases.
*The term demand therefore refers to the entire relationship between the quantity demanded of
a product and the price of that product.
–A change in any of the variables that affect the quantity demanded will shift the demand
curve to a new position.
, - Complements in consumption are products that are used jointly. (Ex: Cars and gasoline)
- Change in demand: change in the quantity demanded at EVERY price
- Change in quantity demanded: Movement from one point on a demand curve to
another point.
● A change in quantity demanded can result from…
- A shift in the demand curve
- A movement along a given demand curve
- A combination of both (demand curve not only shifts to the right or left, but it also
goes up or down too)
Supply
- The amount of some good or service that producers want to sell in some time period is
referred to the quantity supplied.
- Quantity supplied is not necessarily the quantity sold or exchanged
, - What influences the quantity supplied:
1. Product’s own price
2. Prices of inputs(high prices in inputs ↓ profits so firms will supply less)
3. Technology
4. Government taxes or subsidies
5. Prices of other products
6. Significant changes in the weather
7. Number of suppliers
Quantity Supplied and Price:
= A basic economic hypothesis is that the price of the product and the quantity supplied are
related positively, other things being equal.
Product’s price ↑ supply ↑
Product’s price ↓ supply ↓
- Supple curve = relationship between quantity supplied and price
- Change in supply: Shift of the whole supply curve
- Change in quantity supplied: Movement from one point on supply curve to another
point.
● A change in quantity supplied can result from…
- A change in supply with price constant
- A movement along a given curve because of a change in the price
- Combination of the two
Determination of price:
Market Equilibrium:
CHAPTER 3: Demand, Supply, and Price
-The tot. amount of any particular good or service that consumers want to purchase during a
period of time is called the quantity demanded.
-The amount that consumers want to purchase may exceed the amount they actually
purchase.(when quantities not available).= quantity bought or exchanged
-What influences a consumer's want:
1. Product’s price (not the important cause of shifts in demand curve)
2. Consumer’s income
3. Prices of other products
4. Consumer’s preferences
5. Population (increase in pop. increases demand)
6. Significant changes in the weather (cold winter=electricty)
***Holding all other variables constant is often described by the expressions “other things being
equal,” “other things given,” or the equivalent Latin phrase, ceteris paribus.
Flow VS. Stock
A variable that has a time dimension (100L/min)
A variable has a meaning at a specific time (300 eggs sold on sept. 12, 2020)
Demand and Price:
=A basic economic hypothesis is that the price of a product and the quantity demanded are
related negatively, other things being equal. That is, the lower the price, the higher the quantity
demanded; the higher the price, the lower the quantity demanded.
Ceteris paribus:
- Price ↑ demand ↓
- Price ↓ demand ↑
Demand Schedules and Curves:
Schedule=table
,Demand curve= represents the relationship between quantity demanded and price, other things
being equal; its negative slope indicates that quantity demanded increases when price
decreases.
*The term demand therefore refers to the entire relationship between the quantity demanded of
a product and the price of that product.
–A change in any of the variables that affect the quantity demanded will shift the demand
curve to a new position.
, - Complements in consumption are products that are used jointly. (Ex: Cars and gasoline)
- Change in demand: change in the quantity demanded at EVERY price
- Change in quantity demanded: Movement from one point on a demand curve to
another point.
● A change in quantity demanded can result from…
- A shift in the demand curve
- A movement along a given demand curve
- A combination of both (demand curve not only shifts to the right or left, but it also
goes up or down too)
Supply
- The amount of some good or service that producers want to sell in some time period is
referred to the quantity supplied.
- Quantity supplied is not necessarily the quantity sold or exchanged
, - What influences the quantity supplied:
1. Product’s own price
2. Prices of inputs(high prices in inputs ↓ profits so firms will supply less)
3. Technology
4. Government taxes or subsidies
5. Prices of other products
6. Significant changes in the weather
7. Number of suppliers
Quantity Supplied and Price:
= A basic economic hypothesis is that the price of the product and the quantity supplied are
related positively, other things being equal.
Product’s price ↑ supply ↑
Product’s price ↓ supply ↓
- Supple curve = relationship between quantity supplied and price
- Change in supply: Shift of the whole supply curve
- Change in quantity supplied: Movement from one point on supply curve to another
point.
● A change in quantity supplied can result from…
- A change in supply with price constant
- A movement along a given curve because of a change in the price
- Combination of the two
Determination of price:
Market Equilibrium:
