TAILIEUCHUNG - Lecture Economics - Chapter 3: Market supply and demand

After studying this chapter you will be able to understand: Does the price system eliminate scarcity? What is the difference between a “change in quantity demanded” and a “change in demand”? Can Congress repeal the law of supply in order to control oil prices? | Chapter 3 Market Supply and Demand ©2000 South-Western College Publishing Key Concepts Summary Practice Quiz Internet Exercises * In this chapter, you will learn to solve these economic puzzles: What is the difference between a “change in quantity demanded” and a “change in demand”? Can Congress repeal the law of supply in order to control oil prices? Does the price system eliminate scarcity? * What is the Law of Demand? The principle that there is an inverse relationship between the price of a good and the quantity buyers are willing to purchase in a defined time period, ceteris paribus * Return to previous slide while in slide show * What does “Ceteris Paribus” mean? All else remains the same * What is a Demand Curve? Depicts the relationship between price and quantity demanded * $20 $15 $10 $5 4 8 16 20 A B C D Individual’s Demand Curve for Compact Discs Demand Curve P Q * Why do Demand Curves have a Negative Slope? At a higher price consumers will buy fewer units, and at a lower price they will buy more units * What is a Demand Schedule? Shows the specific quantity of a good or service that people are willing and able to buy at different prices * What is Market Demand? The summation of the individual demand schedules * IMPORTANT - KNOW THE DIFFERENCE BETWEEN A CHANGE IN THE QUANTITY DEMANDED AND A CHANGE IN DEMAND * When price changes, what happens? The curve does not shift - there is a change in the quantity demanded * Decrease in Price Increase in Quantity Demanded * $20 $15 $10 $5 1 2 3 4 P Q 5 6 7 8 9 Fred’s Demand Curve D1 * $20 $15 $10 $5 1 2 3 4 P Q 5 6 7 8 9 Mary’s Demand Curve D2 * $20 $15 $10 $5 3 4 5 6 P Q 7 8 9 10 11 Market Demand Curve D3 12 * * $25 1 + 0 = 1 $20 2 1 3 $15 3 3 6 $10 4 5 9 $5 5 7 12 Price Fred Mary Total Demanded Market Demand Schedule for Compact Discs * $20 $15 $10 $5 10 20 30 40 A B A change in price causes a change in the quantity demanded D P Q 50 * When .

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