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Econ 206(A) Tutorial 2

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

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Econ 206(A) Tutorial 2

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  1. Econ 206(A) Tutorial 2

  2. The Demand Curve Price, p A p1 Demand, D 0 q1 Quantity, q

  3. Seminar Topic 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)

  4. Shifts Along a Demand Curve (changes in price of good) Price, p B p2 A p1 Demand, D 0 q2 q1 Quantity, q

  5. Shifts of a Demand Curve (Changes in other factors – taste, income etc) Price, p A B p1 D’ Demand, D 0 q1 Quantity, q q2

  6. Supply • Relationship between price of a good/service and the amount produced by firms. • Higher the price, the more goods/services produced.

  7. Diagram of the Supply Curve Price, p Supply, S C p1 0 q1 Quantity, q

  8. 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

  9. Shifts Along the Supply Curve Price, p Supply, S C p1 F p2 0 q2 q1 Quantity, q

  10. Outward Shifts of the Supply Curve Price, p Supply, S S’ C F p1 0 q1 q2 Quantity, q

  11. Market Equilibrium (Supply = Demand) Price, p Supply, S E p* Demand, D q* Quantity, q

  12. Seminar Topic 2 2. If the demand for a good increases, will more be supplied?

  13. 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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