Homework #3

Chapter 2

Question 1: Daniel Wonderly

Question 5: James Washington

Question 12: Ashlea Ward

Question 17: Katia Trujillo

Working with Graphs and Numbers:

Question 1: Johanna Trujillo

Question 2: Ty Treece

Question 5: Melissa Steele

Alternates: Jermaine Spence and Arturo Soliz

Homework #3

Chapter 2

Question 1: Shelly Arner

Question 5: Albert Depalma

Question 12: Yazan Hawatmeh

Question 17: Jesus Herrera

Working with Graphs and Numbers:

Question 1: Kevin Jenkins

Question 2: Kelsey Jones

Question 5: Sophie Laureano

Alternates: Marisa Navarro and Daniela Rosales

In-class exercise 3

Do we understand Chapter 2?

Chapter 3

Supply, Demand, and Price

Chapter 3

Supply, Demand, and Price

MarketMarket• Market is an arrangement by which people

exchange goods and services including money

• Two sides– Buyer– Seller

Starting with the Buyer SideStarting with the Buyer Side

• Quantity demanded– Amount of a good people are willing and able

to buy at a particular price at a particular point in time

Important parts of definitionImportant parts of definition

• Willing

• Able

• Particular Price

• Particular point in time

DemandDemandQuantity demanded over all prices during a

specific point in time

• Important parts:

• Quantity demanded

• All prices

• Specific point in time

So….So…. So….

Who does what in the Market?

Who does what in the Market?

• Consumers – Buy goods– Sell Labor

• Firms– Sell goods– Buy Labor

Circular FlowCircular Flow• Depiction of how the market works in the

economy

• Includes both buyers and sellers

• Shows the flow of goods and services between consumers and firms

Law of DemandLaw of Demand

• As price of a good (decreases) increases the Quantity demanded of that good

(increases) decreases

Demand ScheduleDemand Schedule• Numerical table of quantity demanded

at different prices

401

302

203

104

QuantityPrice

Demand CurveDemand Curve• Graphical representation of the demand

schedule

• Used to represent the relationship between price and quantity

• Why type of relationship do you expect price and quantity to have?

Demand Schedule and Demand Curve

Demand Schedule and Demand Curve

a

Price (dollars )

(a)

4

3

2

1

10

20

30

40

A

B

C

D

PRICE(dollars )

QUANTITYDEMANDED

POINT INPANEL (b)

DEMAND SCHEDULE FOR GOOD X

4

3

2

1

0 10 20 30 40

B

C

A

D

Demand Curve

Quantity Demanded of GoodX

(b)

Market Demand Curves

Market Demand Curves• Previous demand curve was for an

individual – Single buyer

• How can we get the market curve from individual demand curves?– All buyers

• Sum the individual Demand curves…

Therefore….Therefore….

Deriving a Market Demand Schedule & Curve

Deriving a Market Demand Schedule & Curve

a

QUANTITY DEMANDED

Part (a)

OTHER BUYERS

20

45

70

100

130

160

ALL BUYERS

23

50

77

109

141

173

SMITH

2

3

4

5

6

7

JONES

1

2

3

4

5

6

PRICE

$15

14

13

12

11

10

Deriving a Market

Demand Schedule & Curve

Deriving a Market

Demand Schedule & Curve

a

Quantity Demanded

Part (b)

=

Price ($)

12

11

100 130Quantity Demanded

Demand Curve(other buyers )

Price ($)

1211

109 141

4 + 5 + 100

5 + 6 + 130

00

Market DemandCurve

A3B3

A4B4+

Price ($)

5

11

12

4

Demand Curve(Jones )

Price ($)Demand Curve

(Smith)

+1211

5 6Quantity DemandedQuantity Demanded

00

A1B1

A2B2

Determinates of DemandDeterminates of Demand• Income

– Normal good– Inferior good

• Preferences

• Prices of Related Goods– Substitutes– Compliments

Determinates Continued…Determinates Continued…• Number of Buyers

• Expectations of Future