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Lecture Macroeconomics (9/e): Chapter 4 - David C. Colander
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Lecture Macroeconomics (9/e): Chapter 4 - David C. Colander
Kim Dung
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Chapter 4 - Supply and demand. After reading this chapter, you should be able to: State the law of demand and distinguish shifts in demand from movements along a demand curve, state the law of supply and distinguish shifts in supply from movements along a supply curve, explain how the law of demand and the law of supply interact to bring about equilibrium, discuss the limitations of demand and supply analysis. | Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin 1 Chapter Goals State the law of demand and distinguish shifts in demand from movements along a demand curve. Discuss the limitations of demand and supply analysis. State the law of supply and distinguish shifts in supply from movements along a supply curve. Explain how the law of demand and the law of supply interact to bring about equilibrium. 2 Demand The law of demand states that the quantity of a good demanded is inversely related to the good’s price As prices change, people change how much they’re willing to buy In other words, other things equal, Quantity demanded rises as price falls Quantity demanded falls as price rises The law of demand is based on the fact that when prices for a good rise, people substitute away from that good to other goods 3 The Demand Curve A demand curve is the graphic representation of the relationship between price and quantity demanded Demand P Q The demand . | Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin 1 Chapter Goals State the law of demand and distinguish shifts in demand from movements along a demand curve. Discuss the limitations of demand and supply analysis. State the law of supply and distinguish shifts in supply from movements along a supply curve. Explain how the law of demand and the law of supply interact to bring about equilibrium. 2 Demand The law of demand states that the quantity of a good demanded is inversely related to the good’s price As prices change, people change how much they’re willing to buy In other words, other things equal, Quantity demanded rises as price falls Quantity demanded falls as price rises The law of demand is based on the fact that when prices for a good rise, people substitute away from that good to other goods 3 The Demand Curve A demand curve is the graphic representation of the relationship between price and quantity demanded Demand P Q The demand curve is downward sloping As price increases, quantity demanded decreases P0 Q1 P1 Q0 4 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 Refers to a specific point on the demand curve A change in price causes a change in quantity demanded A change in price causes a movement along the demand curve 5 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 Refers to the entire demand curve Demand tells us how much will be bought at various prices A change in anything other than price that affects the demand curve changes the entire demand curve A change in the entire demand curve is a shift in demand 6 Supply The law of supply states that the quantity of a good supplied is directly related to the good’s price The law of supply .
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