Transcript Q o - Personal.kent.edu

Demand Shift or Supply Shift?
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Lectures in Microeconomics-Charles W. Upton
The Market for Illegal Drugs
• When drug prices
are low, law
enforcement gets
blamed.
Demand Shift or Supply Shift
The Market for Illegal Drugs
• When drug prices
are low, law
enforcement gets
blamed.
• Lax enforcement
means that supply
increases, meaning
lower prices.
Demand Shift or Supply Shift
Supply and Demand
• When drug prices
are low, law
enforcement gets
blamed.
• Lax enforcement
means that supply
increases, meaning
lower prices.
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Demand Shift or Supply Shift
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The Consequence of Lax
Enforcement
• When drug prices
are low, law
enforcement gets Po
blamed.
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• Lax enforcement
means that supply
increases, meaning
lower prices.
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Demand Shift or Supply Shift
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The Supply Shift
• When drug prices
Lower
criminal
are low,
law
penalties
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enforcement
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lower cost of
blamed.
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doing business,
• Lax enforcement
hence greater
means that supply
supply
increases, meaning
lower prices.
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Lower Prices
• When drug prices
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blamed.
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• Lax enforcement
means that supply
increases, meaning
lower prices.
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Greater Quantity
• When drug prices
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blamed.
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• Lax enforcement
means that supply
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The Market for Illegal Drugs
•Once
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drug prices
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enforcement
means that supply
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lower prices.
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Not So Fast
• An economist
would object to
this rapid
conclusion.
Demand Shift or Supply Shift
An Alternative Explanation
• An economist
would object to
this rapid
conclusion.
• The decline in
prices could also
be due to a
demand shift.
Demand Shift or Supply Shift
The Market for Illegal Drugs
• An economist
would object to
this rapid
Po
conclusion.
• The decline in
prices could also
be due to a
demand shift.
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Demand Shift or Supply Shift
S
D
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The Market for Illegal Drugs
• An economist
would object to
this rapid
Po
conclusion.
P1
• The decline in
prices could also
be due to a
demand shift.
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Demand Shift or Supply Shift
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The Market for Illegal Drugs
• An economist
would
object to
Drug
this
rapid
Po
Education
conclusion.
P1
causes the
curve in
• demand
The decline
to
shift could
to the also
prices
leftto a
be due
demand shift.
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Demand Shift or Supply Shift
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The Market for Illegal Drugs
• An economist
would
object to
Prices
this
rapid
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conclusion.
P1
• The decline in
prices could also
be due to a
demand shift.
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Demand Shift or Supply Shift
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The Market for Illegal Drugs
• An economist
would
object to
And
Quantity
thisFalls
rapid
Po
conclusion.
P1
• The decline in
prices could also
be due to a
demand shift.
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Demand Shift or Supply Shift
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Two Explanations
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Demand Shift or Supply Shift
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Two Explanations
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Demand
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Demand Shift or Supply Shift
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Two Explanations
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Supply is
Up
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Demand Shift or Supply Shift
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If the Supply Story is Right
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Price
down,
Quantity
Up
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Demand Shift or Supply Shift
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If the Demand Story is Right
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Po
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Price
down,
Quantity
Down
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Demand Shift or Supply Shift
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What is Going On
Change in Change in
Quantity
Price
S
Cause
Down
Down
Demand Down
Down
Up
Supply Down
Up
Up
Down
Up
Supply Up
Demand Up
Demand Shift or Supply Shift
D
What is Going On
Change in Change in
Quantity
Price
S
Cause
Down
Down
Demand Down
Down
Up
Supply Down
Up
Up
Down
Up
Supply Up
Demand Up
Demand Shift or Supply Shift
D
What is Going On
Change in Change in
Quantity
Price
S
Cause
Down
Down
Demand Down
Down
Up
Supply Down
Up
Up
Down
Up
Supply Up
Demand Up
Demand Shift or Supply Shift
D
What is Going On
Change in Change in
Quantity
Price
S
Cause
Down
Down
Demand Down
Down
Up
Supply Down
Up
Up
Down
Up
Supply Up
Demand Up
Demand Shift or Supply Shift
D
What is Going On
Change in Change in
Quantity
Price
S
Cause
Down
Down
Demand Down
Down
Up
Supply Down
Up
Up
Down
Up
Supply Up
Demand Up
Demand Shift or Supply Shift
D
The Moral of The Story
Change in Change in
Quantity
Price
Down
Down
Cause
Demand Down
Life is supply and demand, but
Down
Up
Supply Down
don’t think about one without
Up
Down
Supply
Up
thinking about the other.
Up
Up
Demand Up
Demand Shift or Supply Shift
Adding Up Demand Curves
-A Bonus
Demand Shift or Supply Shift
Adding up demand functions
P
• Suppose we have
the demand
Po
functions for
North Dakota and
South Dakota.
DND
Demand Shift or Supply Shift
DSD
Q
Adding up demand functions
P
• Suppose we have
the demand
functions for North Po
Dakota and South
Dakota.
• To get the
combined demand
functions, add them
up horizontally.
Demand Shift or Supply Shift
DND
DSD
D
Q
Adding up demand functions
P
• Suppose we have
the demand
functions for North Po
Dakota and South
Dakota.
• To get the
combined demand
functions, add them
up horizontally.
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ND Q SD Q
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Demand Shift or Supply
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End
©2004 Charles
W. Upton
Demand Shift or Supply Shift