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• Chapter 3 homework Numbers 4, 8, 10, and 18
• Theory in Action report
Chapter 4
Introduction to the Demand and Supply Framework
Figure 4.1 The Individual Demand Curve for Coffee
Market Demand
• Horizontal sum of quantities demanded over all people
• Horizontal??? Holding price constant
Figure 4.2 Individual and Market Demand Schedules and Curves
The Law of Demand
• There is a negative or inverse relationship between price and quantity demanded.
Changes in Demand
• Consumers’ income Normal and inferior goods
• Prices of related goods Substitutes and complements
• Tastes and preferences
• Expectations about future prices
• The number of consumers in the market
Changes in Demand (cont’d)
SELF TEST-Do we understand??SELF TEST-Do we understand??
• Substitutes Coke vs. Pepsi --- what happens if the price
of Coke increases? Qd of Pepsi?• NOTHING
Qd of Coke?• DECREASES
Demand for Coke?• NOTHING
Demand for Pepsi?• INCREASES
• Compliments Tennis Balls and Tennis Rackets --- what
happens if the price of Tennis Rackets increase?
Qd of Tennis Balls?• NOTHING
Qd of Tennis Rackets?• DECREASES
Demand for Tennis Balls?• DECREASES
Demand for Tennis Rackets?• NOTHING
Life Lessons
• If you know that the primary “hiring season” is in the spring when should you buy a suit??? Shopping off-season can mean
lower prices.
A Decrease in Demand in the Suit Market
Supply
• The quantity of a good or service that producers are willing and able to produce or offer for sale at a given set of prices over a given period of time.
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