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Title: Economics
Description: Goes into depth on supply and demand, and the different aspects of them. For example the supply and demand curves, and Ceteris Paribus
Description: Goes into depth on supply and demand, and the different aspects of them. For example the supply and demand curves, and Ceteris Paribus
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Lec#
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09
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16
We will answer following questions today
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Why does JC Penny advertise markdown sales for almost every Saturday?
2
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Why does CMU sales less tickets when a basket ball game is scheduled on a
Thursday?
4
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When you sell your last semester’s text books you create a Supply of text books
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1
An individual demand means the quantity of a commodity (soup) that would be
purchased at different prices, ceteris paribus
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What does Ceteris Paribus mean here?
---------------------------------------------What is Everything Else in the above statement? ---------------------*******************************************
Review:
How much of a commodity (or quantity of a commodity) a buyer would buy would
depend on the
a
...
buyer’s income,
c
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whether any substitute of the commodity is available
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buyer’s expectation about future prices
Too many things! So we assume that buyer’s income, taste, availability of substitutes,
and expected future prices are not changing
...
************************************
The four things we just have included in Everything Else are called Ceteris Paribus
factors when one decides about the quantity demanded
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Example: 1
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2
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Price of Soup Can
Quantity of Soup Can
$
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90
5
1
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Draw a graph of this table (Board)
A graph of the Demand Schedule is called a Demand curve
...
Class exercise:
Typically, a demand curve will represent what relationship?
A) the current desire for purchases of fad products as opposed to other products
B) how much the products costs and the quantity of it produced
C) how many people are willing to buy and the quantities each will purchase
D) the price and the quantity demanded by the buyers
3
Difference between Change in quantity demanded and Change in demand
...
Change in quantity
Demanded
Change in Demand
1
...
Shift of demand
Reason
A change in price
A change in
a
...
Income and
c
...
d
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Is this a shift of demand?
Market demand is the sum of all individuals’
Demand
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30
3
4
5
12
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20
1
1
2
4
Add on Exercise HW#2 (Due: Sep
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All Add-ons are for Extra Credits
Show in a graph John’s, Adam’s, Kate’s and Market Demand
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Why does JC Penny advertise markdown sales (drop in P) for almost every
Saturday?-----
4
Refer to Figure 4
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Assuming Mary and
Tom are the only consumers in the market, what is the market quantity demanded at a
price of $15?
A) 1
B) 2
C) 3
D) 9
Let’s then focus on Supply or Individual Supply
...
(Note: The emphasis is on what would be supplied, not on what would be sold)
What are the variables in the above statement?
----------, --------
...
price of that commodity,
b
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Technology
d
...
e
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Too many things! So we assume that, Cost of inputs, Technology, expectation of
future price and production tax or subsidy are not changing
...
************************************
The four things we just have included in Everything Else are called Ceteris Paribus
factors
...
To produce or supply more soup Kate will have to buy more inputs
...
So Kate can supply more if she gets higher price or if the price of soup increases
...
40
8
...
20
18
Here as P rises, Q
rises too
...
Draw a graph of this table (Board)
6
A graph of the Supply Schedule is called a Supply curve
...
Class Exercise:
The law of supply states that:
A) firms supply more of a product as consumer income rises
...
C) firms supply more of a product as the price of the product rises
...
Difference between Change in quantity supplied and Change in supply
...
Change in quantity
supplied
Change in Supply
1
...
Shift of supply
Reason
A change in price
A change in
a
...
Technology,
c
...
production
tax or subsidy
Do we have a name for a, b, c and d taken together?-Market Supply is the sum of all individuals’ Supply
...
30
3
4
5
12
...
20
10
12
12
34
7
Add On Exercise HW#2(Due: Sep
...
Show in a graph John’s, Adam’s, Kate’s and Market Demand
...
4, pgs
...
Have a Great Week!!
8
Title: Economics
Description: Goes into depth on supply and demand, and the different aspects of them. For example the supply and demand curves, and Ceteris Paribus
Description: Goes into depth on supply and demand, and the different aspects of them. For example the supply and demand curves, and Ceteris Paribus