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Lecture Basic microeconomics - Chapter 4: Supply and demand

After reading this chapter, you should be able to: Explain the law of demand and what it implies, explain the law of supply and what it implies, explain how prices adjust to achieve an equilibrium between demand and supply, show the effects of a shift in demand or supply on the equilibrium price and quantity using real-world events. | Supply and Demand Chapter 4 Laugher Curve Teach a parrot the terms of supply and demand and you’ve got an economist. Thomas Carlyle Demand Demand means a willingness and capacity to pay. Demand Prices are the tool by which the market coordinates individual desires. The Law of Demand Quantity demanded rises as price falls, other things constant. Quantity demanded falls as price rises, other things constant. Thus, there is an inverse relationship between price and quantity demanded. The Law of Demand What accounts for the law of demand? People tend to substitute other goods for goods whose price has increased. The Demand Curve The demand curve is the graphic representation of the relationship between price and quantity demanded. The demand curve slopes downward and to the right. As the price goes up, the quantity demanded goes down. The Demand Curve The negative slope tells us that quantity demanded varies indirectly—in the opposite direction—with price. Other Things Constant “Other things constant” in our definition of demand means that all other factors that affect the analysis are assumed to remain constant, whether they actually remain constant or not. These factors may include changing tastes, prices of other goods, even the weather. D Price (per unit) 0 Quantity demanded (per unit of time) PA QA A A Sample Demand Curve, Fig. 4-1, p 84 Shifts in Demand Versus Movements Along a Demand Curve Demand refers to a schedule of quantities of a good that will be bought per unit of time at various prices, other things constant. Graphically, it refers to the entire demand curve. Shifts in Demand Versus Movements Along a Demand Curve Quantity demanded refers to a specific amount that will be demanded per unit of time at a specific price, other things constant. Graphically, it refers to a specific point on the demand curve. Shifts in Demand Versus Movements Along a Demand Curve A movement along a demand curve is the graphical representation of the effect of a change in . | Supply and Demand Chapter 4 Laugher Curve Teach a parrot the terms of supply and demand and you’ve got an economist. Thomas Carlyle Demand Demand means a willingness and capacity to pay. Demand Prices are the tool by which the market coordinates individual desires. The Law of Demand Quantity demanded rises as price falls, other things constant. Quantity demanded falls as price rises, other things constant. Thus, there is an inverse relationship between price and quantity demanded. The Law of Demand What accounts for the law of demand? People tend to substitute other goods for goods whose price has increased. The Demand Curve The demand curve is the graphic representation of the relationship between price and quantity demanded. The demand curve slopes downward and to the right. As the price goes up, the quantity demanded goes down. The Demand Curve The negative slope tells us that quantity demanded varies indirectly—in the opposite direction—with price. Other Things Constant “Other .