Microeconomics

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# Microeconomics - PowerPoint PPT Presentation

Microeconomics. Unit 3. Market. Arrangement that allows buyers and sellers to exchange things Production side Supply Factors of production Consumption side Demand Determinants of demand. Demand. Amount of a good desired at a given price in a specific time. Graphing.

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## PowerPoint Slideshow about 'Microeconomics' - errin

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Presentation Transcript

### Microeconomics

Unit 3

Market
• Arrangement that allows buyers and sellers to exchange things
• Production side
• Supply
• Factors of production
• Consumption side
• Demand
• Determinants of demand
Demand
• Amount of a good desired at a given price in a specific time
Graphing
• The price is always located on the vertical axis and quantity is always located on the horizontal axis.
• Numbers increase as they move away from the origin.

\$

0

0

Q

Graphing Demand
• Demand Schedule
• Ice Cream Sundae Price
• 1 5.00
• 2 4.50
• 3 4.00
• 4 3.50
• 5 3.00
• 6 2.50
• 7 2.00
Graphing Demand
• Demand Curve

\$

6.00

5.50

5.00

4.50

4.00

3.50

3.00

2.50

2.00

1.50

1.00

0.50

D

1 2 3 4 5 6 7 8

Q

Law of Demand
• Demand increases as price decreases
• Demand decreases as price increases
• Inverse Relationship
Quantity Demanded
• Quantity demanded is caused by a change in price
• All other factors remain the same
Elasticity
• How sensitive a product is to a change in price
• Elastic – very responsive
• Inelastic – not responsive
Calculating Elasticity
• Run over Rise

% Quantity

% Price

• PRACTICE (< > = 1)
• Price of Gasoline up from \$3.50 to \$3.60 while quantity demanded down from 6000 gallons to 5900 gallons.
• Price of candy down from \$3.00 to \$2.50 while quantity demanded up from 30 bags to 40 bags.
• Quantity of Senior Sweats down from 305 to 300 sets while price up from \$30 to \$35.
Income Effect
• The change in consumption resulting from a change in real income
• Normal Good
• Reacts normally or follows the law of demand
• Inferior Good
• Demand decreases as income increases
• “Great Cracker Taste Test”
Changes in Demand
• Changes in the Determinants of Demand cause changes in Demand at every Price
• Determinants of Demand
• Income
• Attitude
• Substitute
• Complement
• http://nbr.com/2013/04/05/bright-ideas-getting-to-the-point/
Effects of Determinants
• Increase Demand
• Get a raise
• No substitute choices
• New products to go with the original
Effects of Demand
• Decrease Demand
• New competitor in the market
• Complement not available anymore
Critical Thinking
• Income
• Attitude
• Substitute
• Complement
• Price

D = curve shifts left or right

Qd = movement is on the curve

Exit Slip
• Use the blank half sheet of paper to make up a scenario in which demand will change over time.
• Name the product
• Describe the change in the market
• State which determinant changed
• Graph the changes on demand
• Don’t forget to put you name on the paper
• Due at the end of the period