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Lecture 3
Learning Objectives
Outline
Demand
The Law of Demand
Shifts in Demand
Supply
The Law of Supply
Shifts in Supply
Demand schedule
Demand Curve
Quantity
Demanded
$50
45
40
35
30
25
20
12
15
15
10
20
Price
$50
45
40
35
30
25
20
15
10
5
A
B
C
D
E
F
G
H
I
0 2 4 6 8 101214161820
Quantity
Tastes.
Income.
Expectations.
Other goods:
Substitutes.
Complements.
Number of buyers.
Increase in demand:
shift the curve right.
Decrease in demand:
shift the curve left.
Changing Demand
(Shifting the Demand Curve)
The only thing that can cause the entire curve to move
is a change in a determinant other than the goods own
price.
$45
40
d2
d1
35
30
25
g1
Movement
along curve
20
15
D2 Increase
d
demand
D1
Initial demand
10
5
0
10
12
14
16
18
20
22 Quantity
Movement along the curve: buyers behavior does not change; buyers only react to a
price change.
Shift the curve: buyers behavior does change.
Shifts in Demand
Substitutes
Shifts in Demand
Complementary goods
Supply
Supply Curve
Quantity
Supplied
(Qs)
P
50
$50
20
40
40
15
30
30
10
20
20
10
10
10
15
20
Qs
It is an upward-sloping curve on a
market diagram.
Technology
Factor Costs
Taxes and
subsidies
Expectations
Other goods
Number of sellers
Changing Supply
(Shifting the Supply Curve)
The only thing that can cause the entire curve to move
to the right or to the left is a change in a determinant
other than the goods own price.
Increased
supply
P
P2
Movement
along curve
P1
Shift in
supply
Qs
Summary Discussion
Summary Discussion
(cont'd)