ECON 1B03 Lecture Notes - Lecture 4: Economic Equilibrium, Demand Curve, Complementary Good

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carminedolphin665

16 Jan 2016

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ECON 1B03 Full Course Notes

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A movement along the demand curve due to change in price of the good itself. A shift of the demand curve when anything other than the price of the good changes. Increase in demand shifts right, decrease shifts left. Consumer income as income increases, the demand for a normal good increases, shifts right as income increases, the demand for inferior goods decreases, shifts left. If goods are substitutes, increase in the price of one good will shift the demand for the other good to the right. If goods are complements, an increase in the price of one good will shift the demand for the other good to the left. Changes in expectations and tastes will shift demand accordingly. Quantity supplied quantity of goods firms, sellers, producers, suppliers are willing and able to sell at any price, p. When price of good increases, ceteris paribus, selling the good becomes more profitable and firms will want to offer more for sale.

Related Questions

Which of the following is true?

a. The demand curve for a good shift leftward when the price of a substitute rises.
b. If consumers expect the price of a good will rise in the future, the demand curve shifts leftward.
c. An increase in population shifts the demand curve for most goods leftward.
d. For an inferior good, when income increases, the demand curve shifts leftward.

maroonferret252

Please review the following work and correct me if I have mixed up the concepts of movements and shifts of supply and demand curves. Feel free to copy and edit/correct my mistakes. I'll be waiting. Thanks in advance!!

Changes in price dictate movements along demand curves. When a decrease in demand or the quality demanded occurs it's a safe bet that it's correlated to a price increase, which in turn leads to a resultant surplus of that particular commodity in the marketplace. This is because decreased demand means less of that commodity being sold. On the other hand, a price decrease usually leads to an increase in the demand for a particular commodity, or an increase in sales, which in turn leads to a shortage of that commodity in the marketplace.

To shift the demand curve itself, changes need to occur in other aspects of the market beyond simply a change in the price of a commodity. For example, an increase in income means the consumers have more disposable income. With more disposable income, demand for commodities will increase, and results in a shift of the demand curve itself. In this example, the demand curve would shift right. On the opposite side of the coin, cost increases due to production or losses in efficiency may decrease the side of supply, shifting the demand curve to the left.

Analogous to shifts in the demand curve, shifts along a supply curve occur when prices change as well. When the cost to produce a commodity increases, supply drops, and the supply curve shifts to the left. If the cost of production drops, and supply increases, the supply curve shifts to the right as demand develops.

Pharmaceutical supply and demand is an easy way to understand these concepts.

Drug demand increases: Price decreases, supplies decrease.

Drug demand decreases: Price increases, supplies increase.

Drug supply increases: Production costs drop, demand drops.

Drug supply decreases: Production costs increase, demand increases.

"But where and how do movements and shifts occur in the above?"

purpleworm770

One reason that the quantity demanded of a good increase when its price falls is that the:

A) Price decline shifts the supply curve to the left.

B) lower price shifts the demand curve to the left.

C) lower price shifts the demand curve to the right.

D) lower price increases the real income of buyers, enabling them to buy more.

raspberryhorse169

ECON 1B03 Lecture Notes - Lecture 4: Economic Equilibrium, Demand Curve, Complementary Good

ECON 1B03 Full Course Notes

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