Parisa Shakur

Lecture – 7,8
 What is Demand?

 Law of Demand and why it holds

 Individual and market demand curve

 Change in quantity demanded vs. change in

demand

 Shift factors and movement factors

 Movement factors
1. Own price

 Shift factors
1. Income
Normal, Inferior, Neutral
2. Preferences
3. Price of related goods
Substitutes, Complements
4. Number of buyers
5. Expectations of future price
1. The demand curve

2. Individual and Market demand curves

3. Movement of the demand curve (up & down)

4. Shift of the demand curve (right and left)

 What is Supply

 Law of Supply and exceptions

 Why most supply curves are upward sloping

1. Increasing Opportunity cost

 Supply curve vs. Market supply curve

 Change in quantities supplied vs. change in

supply
 Movement factors
1. Own price

 Shift factors
1. Prices of relevant resources
2. Technology
3. Number of sellers
4. Expectations of future prices
5. Taxes and subsidies
6. Government restrictions
 Excess supply

 Excess demand

 Equilibrium price

 Equilibrium quantity

 Equilibrium

 Disequilibrium

 Disequilibrium price
 Surpluses and price change
 Shortages and price change

 Different speeds of moving

 Maximum and minimum prices

1. The supply curve

2. Individual and Market supply curves

3. Movement of the supply curve (up & down)

4. Shift of the supply curve (right and left)

5. Equilibrium, surplus and shortage

 Consumer surplus

 Producer surplus

 Total surplus
 Demand rises, supply remains constant
 Demand falls, supply is constant
 Supply rises, demand is constant
 Supply falls, demand is constant
 Demand rises and supply falls by an equal amount
 Demand falls and supply rises by an equal amount
 Demand rises by a greater amount than supply falls
 Demand rises by a smaller amount than supply falls
 Price ceiling: It is a government-imposed
maximum price above which legal trades
cannot be made
 Effects
1. Shortages

2. Fewer exchanges
3. Non-price rationing devices
4. Buying and selling at a prohibited price

5. Tie-in sales
 Price Floor: It is a government-imposed
minimum price below which legal trades
cannot be made
 Effects
1. Surpluses

2. Fewer exchanges
Q. Do buyers always prefer lower prices to
higher prices?
Ans: Yes, given no strings attached or ceteris
paribus
 Review chapter 3 thoroughly

 Read pages 358-66