Professional Documents
Culture Documents
Chapter 3 - The Market Model (September 25,2019)
Chapter 3 - The Market Model (September 25,2019)
Demands
The Law of Demand States that the higher the price the lowerthe
quantity that will be demanded there is an inverse relationship
between price and quantity demanded
Demand curve downward sloping
P Price
clearly influences the quantity
C demanded
750 Ggg
Grue
t i
600 I
l fl
I i
50 770 Q
substitutes OR
compliments
Substitutes khat you consume instead of something else
Buller 1Margarine
Eg
Tea Coffee
Increase in income
Shift to rightCnew curve
Supply
The higher the price the higher the quantity that will be
available for sale
The higher the price the more incentivized the seller
f
700
i
I
l l
l l
l l
t
40 to Q
Decrease in Technology
Supply
Leftward Shift
curve Same as upward shift
K what if the curve was
flatter
Market Model
500
I
I y
l
l
r
li l
l
D
Q Demanded 1 Supplied
Excess Demand
shortage
t l b
I t
Q
Supply of carrots decrease
Supply curve i
Shift to left lapward or inward
Tp Sa
I
I k l l
l I
I f D Dz
Q Q Q
Decriminalize Increase demand for ganja small ant
People were using it before
Except People who were afraid to use it
Right
Price Up
shift Becomes More Valuable
Qty Ap
Ganja Lucrative
one of best marijuana in the world
Perfectly Inelastic
62om
Example Mona Lisa Painting Worth Year
620m US 2016
750M US 2017
51830M US 2018
90Om USft 2019
Quantity fixed at one
Increase in demand Prices are forced
up
P
unlimited
supply
i 1 horizontal curve
I l
l l
l I
i n l Be Perfectly Elastic
Q
Q Q2
Welfare
CS Consumersurplus
g
p y PS producersurplus
PS f
I
I
d
Producer Surplus Difference between minimum price the seller is
Producer Rent Willing to accept for the product seller's
profit reservation price and the price heactually
receives
Producer surplus is the area above the supply curve but below
the price
END OF UNIT 3