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once said:
to the right.
As the price goes up, the quantity
A $0.5 9 3.50 G
3.00 D
B 0 8 Demand
dollars)
2.00 C for
C 1.00 6 DVDs
D 2.00 4 1.00
F B
A
E 3.00 2 .50
0
4.00 1 2 3 4 5 6 7 8 9 10111213
Quantity of DVDs demanded
(per week)
Price (per unit)
PA A
D
0
QA
Quantity demanded (per unit of time)
Other things constant places a limitation
on the application of the law of demand.
◦ All other factors that affect quantity demanded
are assumed to remain constant, whether they
actually remain constant or not.
◦ Other things constant places a limitation on the
application of the law of demand.
◦ These factors may include changing tastes,
prices of other goods, income, even the
weather.
Shifts in Demand Versus
Movements Along a Demand
Curve
Demand refers to a schedule of
quantities of a good that will be bought
per unit of time at various prices, other
things constant.
Graphically, it refers to the entire
demand curve.
Shifts in Demand Versus
Movements Along a Demand
Curve
A
$1
D1
0
100 200
Quantity demanded (per unit of time)
Change in demand
(a shift of the curve)
$2
Price (per unit)
B A
$1
D0
D1
100 200 250
Quantity demanded (per unit of time)
Number of buyers
Income
Tastes
Expectations
Prices of related goods
Shift factors of demand are factors that
cause shifts in the demand curve:
◦ Society's income.
◦ The prices of other goods.
◦ Tastes.
◦ Expectations.
◦ Number of Buyers
◦ Taxes on subsidies to consumers.
An increase in income will increase
demand for normal goods.
Normal goods: Goods for which demand
right.
The slope tells us that the quantity
A
PA
0
QA
Quantity supplied (per unit of time)
Movement along a supply curve
Change in quantity
A supplied (a movement
$15
along the curve)
1,250 1,500
Quantity supplied (per unit of time)
S0
S1
Price (per unit)
A B
$15
Shift in Supply
(a shift of the curve)
1,250 1,500
Quantity supplied (per unit of time)
Other factors besides price affect how
much will be supplied:
◦ Prices of inputs used in the production of a
good.
◦ Technology.
◦ Suppliers’ expectations.
◦ Taxes and subsidies.
Resource
Prices
Technology
Prices of Related
Goods and Services
And
Productivity
Supply
Number Expectations
Of Of
Producers Producers
The market supply curve is derived by
horizontally adding the individual supply
curves of each supplier.
When taxes go up, costs go up, and
profits go down, leading suppliers to
reduce output.
When government subsidies go up, costs
3.50 A
3.00
2.50 E
2.00 C
1.50
Excess demand
1.00 D
1 2 3 4 5 6 7 8 9 10 11 12
Quantity of DVDs supplied and demanded
S0
Price (per DVDs)
B
$2.50 Excess demand
A
2.25
D0 D1
0 8 9 10
Quantity of DVDs (per week)
S1
S0
Price (per DVDs)
C
$2.50 Excess demand
B
2.25 A
D0
0 8 9 10
Quantity of DVDs (per week)
If both the demand curve and supply curve
move to the left, we can predict:
1. price will fall, but we cannot predict
quantity.
2. price will rise, but we cannot predict
quantity.
3. quantity will rise, but we cannot predict
price.
4. quantity will fall, but we cannot predict
price.
Price
Q2 Q3 Q1 Quantity
Suppose that both the price of gasoline and
the amount of gasoline sold decline. Which
of the following would account for this?
1. A shift left of the demand curve, but no
change in the supply curve
2. A shift right of the demand curve, but no
change in the supply curve
3. A shift left of the supply curve, but no
change in the demand curve
4. A shift right of the supply curve, but no
change in the demand curve
Price
P1
P2
Q2 Q1 Quantity