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Econ 206(A) Tutorial 2. The Demand Curve. Price, p. A. p 1. Demand, D. 0. q 1. Quantity, q. Seminar Topic 1. What Factors Determine the Demand for a good? The price of the good or service x: p x Consumer tastes: T Consumer incomes: Y The prices of substitutes: p y - PowerPoint PPT Presentation
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Econ 206(A) Tutorial 2
The Demand Curve
00
Price, Price, pp
Quantity, Quantity, qq
Demand, Demand, DD
pp11
qq11
AA
Seminar Topic 1
1. What Factors Determine the Demand for a good?
• The price of the good or service x: px
• Consumer tastes: T• Consumer incomes: Y
• The prices of substitutes: py
• The prices of complements: pz
Can be expressed as:
Dx = f (px, T, Y, py, pz)
Shifts Along a Demand Curve (changes in price of good)
00
Price, Price, pp
Quantity, Quantity, qq
Demand, Demand, DD
pp11
pp22
qq11qq22
AA
BB
Shifts of a Demand Curve (Changes in other factors – taste, income etc)
00
Price, Price, pp
Quantity, Quantity, qq
Demand, Demand, DD
pp11
qq11
AA
D’D’
q2q2
BB
Supply
• Relationship between price of a good/service and the amount produced by firms.
• Higher the price, the more goods/services produced.
Diagram of the Supply Curve
00
Price, Price, pp
Quantity, Quantity, qq
Supply, Supply, SS
pp11
qq11
CC
Determinants of Supply
What determines supply of a good/service?
• The price of the good or service x: px
• Any changes in the price of inputs, this includes:• raw materials, capital, labour etc
• Changes in production technology
Shifts Along the Supply Curve
00
Price, Price, pp
Quantity, Quantity, qq
Supply, Supply, SS
pp11
qq11
CC
qq22
pp22
FF
Outward Shifts of the Supply Curve
00
Price, Price, pp
Quantity, Quantity, qq
Supply, Supply, SS
pp11
qq11
CCS’S’
qq22
FF
Market Equilibrium (Supply = Demand)Price, Price, pp
Quantity, Quantity, qq
Supply, Supply, SS
Demand, Demand, DD
p*p*
q*q*
EE
Seminar Topic 2 2. If the demand for a good increases, will
more be supplied?
Seminar Topics
3. What are the major assumptions economists
make concerning consumer behaviour?
– Comparability (good A & B can be compared and ranked in terms of preference)
– Non-Satiation
– Consistency (if A>B, B>C then A>C)
– Convexity (diminishing marginal utility of consumption)
– Independent utilities (Other individuals consumption does not affect your utility) – what about `positional’ goods?
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