Individual Market Demand
At each price, add up the total economic demand
-horizontal summation of the demand curve
1) Look at market/industry demand; flatter, elastic than individual demand curve
2) Aggregate demand
-assume all units the same (globs on GDP)
difficulty: modeling; when agg. price level increases, we buy less GDP
-includes all prices
Comparative Statics
-quantity demand; asks, what things impact how much we buy?
a) prices of the goods in question
b) "other stuff"
-Price of the good itself: change in quantity demand,
-->movement along existing demand curve
Changes on Demand
Consider boiling point of water; can alter by changing the pressure; in same way, other factors can influence how much we purchase
Things That Impact Consumption Choice
1) Income
2) Prices of Other Things
3) Expectations
- of price, of anything, way consume burritos
4) Tastes
5) # of Participants
1) & 2) ==> Ability to pay
3) 4) 5) ==>Willingness to pay
Demand Shifts Out:
At given price, consume more
-Demand has increased
-Price has not changed;
Demand can also shift in when we consume LESS!
Income
When gain more income, consume more?
-more vacations, make repairs, buy clothes
-better quality of stuff
"Normal Goods" = when income increases, quantity increases
"Inferior Goods" = when income increases, quantity demand falls
-Goodbye ramen noodles and Genny Light!
Consider, during recession people go to state parks instead of Disney; more income demand for $$ stuff shifts in
Price of Other Thing
a) Substitutes (Replacements)
-when burgers more $, demand of burrito increases
Demand shifts OUT
b) Complement (Go together)
-hot sauce price goes up, consume less burritos as if burrito price went up
In econ, no natural pairing of goods
-->examine relationships; price burger up, consumption of burrito up
Demand shifts IN
Tastes
-Burrito hurts stomach, change taste and shift demand
Expectations
Expectations of income
ex: student loans, expect future income to go up
(students consume more than their current income allows)
ex: Rizzo can't afford his current house, takes out mortgage because knows in future, wife will be employed and his salary will go up
Prices of Other Things
ex: Storm oncoming, prices rise but people buy more
-->desire to buy today, expectations change
-expect that prices higher later than today
-if think future prices go up, today will buy more
ex: Rizzo thinks natural gas will be the important fuel source of the future
-expects relative to oil/solar/wind thinks natural gas will be cheaper for electricity
-price substitute fall, change behaviors
Elasticity
How much more!
For good, when consumption responsive to price, demand is elastic
-sometimes if prices change, consumption doesn't change
ex: no matter the price of pencils, still will buy the same amnt --> "inelastic"
but European travel is elastic
-when can measure elasticity with respect to anything
--> price of pizza, mood, temperature, age
Own Price Elasticity of Demand
-when price of your good changes, what do you do
50% / 20% = 2 (be able to express this in words)
No comments:
Post a Comment