NOTES (1/16/15)- SURPLUS & SHORTAGE

• Surplus: QS > QD
• Shortage: QD > QS 
• Equilibrium: point at which supply and demand intersect; resources are used efficiently
• Disequilibrium: resources are not used efficiently and not intersecting
• Price Ceiling: government imposed price control on how high a price can be changed for a product/service
• Ex. rent control
• Price Floor: government imposed price control on how low someone can charge for a product/service
• Ex. minimum wage

NOTES (1/14/15)- ELASTICITY

• Price Elasticity of Demand: tells how drastically buyers will cut back or increase their demands for a good when a price rises or falls
• (1) Elastic Demand- when demand changes greatly due to a change in price (E>1)
• (2) Inelastic Demand- demand will not change even if the price changes (E<1)
• (3) Unit Elastic- perfect ideal situations (E=1)

% Change in Quantity:

            new quantity - old quantity

                       old quantity

% Change in Price:

            new price - old price

                     old price

Price Elasticity of Demand:

      % change in quantity

        %change in price

NOTES (1/12/15)- DEMAND AND SUPPLY 

• Demand: quantities that people are willing and able to buy at various prices
• The Law of Demand: an inverse relationship between price and quantity demanded
• Causes of "change in quantity demanded":
• caused only by a change in price
• Causes of "change in demand"
• a change in buyer's taste (advertising)
• a change in number of buyers (population)
• a change in income
• (1) normal goods: goods that buyers buy more of when their income rises
• (2) inferior goods: goods that buyers buy less of when their income rises
• a change in price of related goods
• (1) substitution goods: goods that serve roughly the same purpose to buyers
• (2) complimentary goods: goods that are often consumed together
• a change in expectations

Demand Curve:

• Supply: quantities that producers/sellers are willing and able to produce/sell at various prices
• The Law of Supply: direct relationship between price and quantity supplied
• Causes of "change in quantity supplied":
• change in price
• Causes of "change in supply":
• change in weather
• change in technology 
• change in cost of production
• change in taxes or subsidies
• change in number of sellers
• change in expectations

Supply Curve: