Transcript econ chapter 3 and 4 - ScarletBusinessEconomics

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JA Economics
Demand – Chapter 3
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AU856roF0&feature=related
Why it Matters
 Consumer
 Limited
 Good
Income
choices
Influences of the Market
 Entrepreneurs
market
 Interest
in the new product
 Economy

bring new products to the
evolved
People traded with one another
Law of Demand
Demand
 What
does it mean?
 Economists
 Page
usage.
33, “How many hamburgers would
you buy?”
Think of prices
Diminishing marginal utility
 Diminishing

= reduced
 Marginal

=additional
 Utility

= satisfaction
Market Demand
Price Elasticity of demand
 Measurement
 Indicator
 See
page 39 (milk and cola)
Prices in 1990
 Stamp:
$0.25
 Gallon
of Gas: $1.16
 Gallon
Milk: $2.78
Prices in 2011
 Stamp:
$0.44
 Gallon
of Gas: $3.09
 Gallon
Milk: $3.67
Change in Demand
 Does
a change in price change
demand?
 Look
at page 41
 What
shift?
could cause the demand for gas to
7 Factors that Affect Demand
 Change
in Income
 Prices or Availability of Substitutes
 Prices or Availability of Complementary
Goods
 Change in the Weather or Season
 Change in the Number of Buyers
 Change in Styles, Tastes, Habits
 Change in Expectations
Change in Income
 What
can change your income?
Prices or Availability of
Substitutes
 Public
transportation
Prices or Availability of
Complementary Goods
 Price
of chips goes down due to sale…
 What
will consumer also buy?
 Shift to the right when the two goods tend to
be consumed or used together in relatively
fixed or standardized proportions
Change in weather or season
Change in number of buyers
Shift to the right due to more quantity being demanded.
Changes in styles, tastes and
habits.
 Electric
cars
Change in expectations
 Consumers
look to the future
Your Future
 SUPPLY!
 How
does supply illustrate the price
effect?
JA Economics
Supply – Chapter 4
Why it Matters
 Understanding
how the producers think.

What good and services to produce?

How should they be produced?

Who will they be produced for?
Price Effect
 Demand
 Consumers
buy less of something at a higher
price than a lower price
 Supply

Producers are willing and able to produce more
at a higher price
Law of Supply
Graphing Supply
Supply of Tortillas Produced by Casa de
Tortillas
$1.40
$1.20
$1.00
$0.80
$0.60
$0.40
$0.20
$0.00
0
500
1000 1500 2000 2500 3000
Market Supply
 More
than one producer in a market
 Marginal
 Higher
Costs differ
prices provide an incentive
Price Elasticity of Supply
 Like
demand there is elasticity in supply
 Depends on the response or ability of
producers
Entrepreneurs
 Increase
 Raise
 Push
supplies
employment
incomes higher
Price effect and supply
Changes in Supply
 Changes
in marginal cost of production
 Changes
in the number of producers
 Change
in expectations
Changes in Marginal Cost of
Production
 Research
 Worker
suggestion for efficiency
 Marginal
cost of productions falls
Changes in the Number of
Producers
 New
businesses
 Popularity
Change in Expectations
 Price
of oil
 Price
of SUVs
Your Future
 Market-Clearing
 Combine
 Roles
Price
chapters 3 and 4
of prices in a market economy