Lecture 2 Supply Demand Complements Substitutes Benjamin Graham
Lecture 2: Supply, Demand, Complements, Substitutes Benjamin Graham Lecture 2: Supply, Demand, etc. Benjamin Graham
Today’s Plan • Testing the Clickers • Housekeeping • Supply and Demand • Demand vs. Quantity Demanded • Supply vs. Quantity Supplied • Complements and Substitutes Lecture 2: Supply, Demand, etc. Benjamin Graham
Housekeeping • Section begins next week Lecture 2: Supply, Demand, etc. Benjamin Graham
Reading Quiz • Peanut butter and jelly are: • A. Complementary Goods • B. Substitutes • C. Superior Goods • D. Partner Goods • E. Welfare-maximizing Goods Lecture 2: Supply, Demand, etc. Benjamin Graham
Reading Quiz 2 • Demand curves slope _____. • A. Upward • B. Downward • C. Upward for superior goods, downward for inferior goods • D. Upward for inferior goods, downward for superior goods Lecture 2: Supply, Demand, etc. Benjamin Graham
Reading Quiz 3 • A rise in temperature is likely to. • A. Increase the demand for ice cream • B. Increase the supply of ice cream • C. Increase the quantity of ice cream supplied • D. Both A & B • E. Both A & C Lecture 2: Supply, Demand, etc. Benjamin Graham
Why we’re starting with supply and demand • As bedrock as bedrock gets • We usually talk about goods • Supply and Demand also explains prices for labor (i. e. wages) • It even explains the value of currencies Lecture 2: Supply, Demand, etc. Benjamin Graham
Demand (individual) Lecture 2: Supply, Demand, etc. Benjamin Graham
Demand (market) Lecture 2: Supply, Demand, etc. Benjamin Graham
Demand vs. Quantity Demanded Lecture 2: Supply, Demand, etc. Benjamin Graham
Demand vs. Quantity Demanded Changes in the price of oil cause the demand curve for oil to shift, whereas changes in the fuel efficiency of cars cause a movement along the demand curve for oil. A. True B. False Lecture 2: Supply, Demand, etc. Benjamin Graham
Quick Question What affects the demand for automobiles? Lecture 2: Supply, Demand, etc. Benjamin Graham
Supply (individual) Lecture 2: Supply, Demand, etc. Benjamin Graham
Supply (market) Lecture 2: Supply, Demand, etc. Benjamin Graham
Quick Question What are two things that affect the supply of automobiles? Lecture 2: Supply, Demand, etc. Benjamin Graham
Review Question If the price of automobiles went up, what would happen? A. The supply curve would shift right B. The supply curve would shift left C. The quantity supplied would increase D. The quantity supplied would decrease E. A&C F. B & D Lecture 2: Supply, Demand, etc. Benjamin Graham
Group Question • Imagine there is an E. Coli outbreak in spinach. • What happens to the demand for spinach? What happens to the demand for kale? What happens to the demand for salad dressing?
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