The 3 Signs of a healthy labor market: price stability, economic growth, healthy labor markets.

Demand the various quantities of an item are willing and able to purchase at various prices ceteris paribus (c pronounced with k) (everything held constant)

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Its like a petri dish, a Law  of demand (some people still call it a theory)  about the relationship between price and quantity demanded, if price goes up then quantity demand goes down and vice versa inverse relationship.

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Relatively small amount of categories to explain the law, non price determinants of demand, also same name, price is important for product x another price determinant that pre disposes x which is the basic wanting of the product. Negative price if it is not a wanted item

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If everything else is held constant if there is an increase in the taste of good x that means price is still consistent, the initial level of taste helps determine what the demand curve is, demand and want are not totally interchangeable, demand requires some ability to pay, even if we want a jet for example does not mean there is a demand because the payment factor is missing 

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X should have demand increase if income is increased a normal good, some goods may have as income goes up they may want less of that good that is inferior good.

2/24/2025: 

Next quiz 3/3/2025 Moodle Chapter 3 Assignment On Moodle, Mid Term Exam 

The 12th Midterm Exam, start studying for it, start studying everyday for 30 minutes for it/make schedule 

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Demand inverse relationship price and quantity, income is a measure for the ability to pay, peoples incomes go up they shift away from, infeurior products people shift away from those.

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Ramen noodles an example of it, mobile goods may be inferior good considered. Whether people actually behave that way. 

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Another non price determinant, on handout print out, prices of related goods in consumption, 2 types, price, Dr Pepper  vs Mr Pibb  good example of this if its 99 cents. Lets say theres a 30 cent increase in Dr pepper, some people because or price increase may switch over to Mr Pibb, tuition another example because there are other options

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X and Y are complementary, example in increase in price of golf, the price of golf balls will go down, 4th non price determinant is buyers expectation, big frost what about citrus crop it may make orange juice expensive you may go buy a whole bunch because expectation is price will go up at the yet unchanged price 

Demand refers to the various quantities of goods that consumers are willing and able to purchase at different prices, assuming all other factors remain constant (ceteris paribus). The law of demand states that there is an inverse relationship between price and quantity demanded: as the price increases, quantity demanded decreases, and vice versa. Non-price determinants that can affect demand include consumer preferences (tastes), income levels (distinguishing between normal goods and inferior goods), the prices of related goods (substitutes and complements), and buyers' expectations about future prices. For example, if the price of Dr. Pepper rises, some consumers may demand more Mr. Pibb instead. Additionally, expectations about future prices can influence current buying behavior, as seen in volatile markets such as citrus during a crop failure.X and Y are complementary, example in increase in price of golf, the price of golf balls will go down, 4th non price determinant is buyers expectation, big frost what about citrus crop it may make orange juice expensive you may go buy a whole bunch because expectation is price will go up at the yet unchanged price 

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Buyers Expectation is important in economics, difficult to know, 5th non price determinant characteristics of the population/demographics, good example, kinds of products in that cohort purchase, more healthcare in baby boomers 6 including price of good itself (remember these 6 ) book says number 6 is number of buyers in market. 

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Market Demand: Horizontal summation of individual demands or individual quantities demanded at each possible price.

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Example: Suppose that initially Good x is composed of 2 individuals and A and B. Good x is initially $2 per unit and the quantity demanded by individual A is 10 units at a price of 1 dollar they get 20 units. Individual be at $2 per unit demands 10 units but for $1 its only 15. Calculate the market demand for x

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A and B combined would be $35 for the market demand curve, for individual C $2 15 units $1 20 units, its not necessary to think about it that way, increase in number of buyers and markets. Good x is a normal good, increase demand, good demand for x could increase, their demand could go to the right so market demand could go to the right. If more buyers come into the market A and B could not be affected.

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One more thing about demand that needs to be thought about demand vs change in quantity demanded.

Delta D vs Delta Q 

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Demand curve going to the right means demand is going up, change in demand vs quantity demand will definitely be on the quiz 

2/26/2025:

12th is midterm exam, don’t wait until last second, start studying on Saturday the 1st and carve out a little time each day from then on maybe earlier if I get my project done. 

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Supply and Demand model it can always be traced in supply and demand 

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Supply the various quantities of an item are willing to offer or sell for several prices, as price goes up, price of 0 quantity supply would be 0. Some point as price goes up that is going to make it worthwhile to firm to sell more

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Our hypothesis quantity supply  would be directly positively correlative related, price is important in explaining what causes sellers to want to have more or less of a product taste of product is important. Some non price determinants of supply, it could depend on what the product is.

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Suppose we have a good x, initial supply curve, initial price, quantity sold at that price, then lets say theres an increase in a resource, critical thing used if we have to raise price for production of product, we may take that increase in price and tag it on to product x, may shift price in, same amount before in total revenue they are held harmless.

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If we add price input then the seller, same amount as the price increases as before as people still get it demand then the demand curve is vertical , law of demand is not totally in alignment here but it depends on product. 

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You could adjust your behavior but in short run you may not have time for that, if seller says they can’t increase price, demand curve would become horizontal neither would be expected in general case.

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2nd Techonolgy/ Productive improvement could cause, increase techology rightward shift in supply curve, increase in technology shovel example

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3rd Natural conditions, like cotton rain right time and right amount, 4th non price determinant expectations if x is supposed to increase in future firms current production as todays unchanged price expectations could also incorporate entrepreneurial spirit.

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We know drive is important, entrepreneurship is usually something your born with, law of supply as quantity goes up if everything else held constant if we were to add another firm G at a price of $4 

Economic Notes 3/3/2025: 

Quizzes are good idea of what midterm looks like, largely multiple choice, 2nd quiz on Wednesday, supply and demand. Add to thing: Questions I struggle with on homework, Chapter summary, quiz  and other little details from notes. 

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If it shifts to the right that means it goes up find ins and outs and add it to main concept map 

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Magnet brings price and quantity to equilibrium, surplus from metaphorical equilibrium magnet, gravitational forces that exist within the market, there trying to get rid of disequlibrium 

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Bring convergence between price and quantity demanded, use the tools of supply and demand analysis to answer a series of questions for this type of nature 

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Systematically go through with supply and demand concept increase in consumer wanting candy bars we start with downward slope in demand curve and upwards in supply curve 

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If we draw graph downward slope in demand curve, upward in supply curve, taste equals increase in demand curve, what if everything held constant, what happens to equilibrium price and quantity of ramen noodles or other inferior good,  if there is an increase in consumer income, supply would go down 

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Suppose with everything held constant there is an increase in the price of fiberglass what will be the predicted impact of equilibrium P and Q of fiberglass canoes?

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Increase in price of fiberglass canoes with input which one is going to be impacted, it would affect supply curve 

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Supply curve not as up or down but left or right, decrease in supply it would shift left if increase it would go to the right because if you shifted it the supply curve would actually increase, demand would be left or right or up or down it wouldn’t matter 

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Increase in price decrease in quantity, chips and salsa are complementary goods what is the impact on the equilibrium of nacho chips if the price of salsa goes down?

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A Equilibrium prices increases and Q decreases

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B P decreases, Q increases 

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C P and Q both increase (Answer C) 

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D P and Q both decreases 

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Lots of comparative status questions on quiz, identify questions, draw picture of supply and demand which one is being

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Decrease in price is going from 1 point to another point, question on quiz and exam, quantity demanded vs demand 

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Suppose there is an decrease in salsa this will result in 

AIncrease in demand for salsa 

B Increase in quantity demanded for salsa (Answer) 

C Decrease in demand for salsa 

D Decrease in quantity demanded for salsa 

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Good x does not conform to laws of supply and demand  everything is pushing toward equilibrium, increase in technology, increase in supply of good x, supply curve goes rightward, lower price high equilibrium quantity 

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2 questions that I can apply to all of these 1 How much? Unknown 2 How long does it take to get from 1 equilibrium to the next?From A to B this question is also largely unknown, in reality we may never get to point B so it is unknown 

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Models by nature not necessarily accurate, gasoline market, everything held constant, everything else held normal, theres a hurricane something unusual has happened, things just increase randomly, may depend on market were talking about 

This goes up, our prediction would be everything else held constant, not really knowing anything about good X other than it is a good. Everything else held constant, an increase in price of good X. We would predict would lead to a decrease in the quantity demanded for X. Decrease would make, probably increase the quantity demanded. So there should be an inverse relationship between price and quantity demanded, and graphically that would be depicted by a downward sloping demand curve between price and quantity. Again, it's a theory, it's a hypothesis, pretty good theory though, and so because it seems like such a compelling story that price and quantity should be inverse, the quantity demanded should be inversely related. We only call it the theory of demand, we call it the law of demand. But price isn't everything, so there are some non-price determinants of demand, other things besides price that affect how much buyers are willing and able to purchase of good X or whatever product we're talking about. And what might be some of those non-price determinants of demand? There are, you know, really just a small handful of broad categories that cover a lot of ground, that cover most of the demand for a particular product, most of how much people are willing and able to purchase of a product, is explained by variations in price, taste and preferences, income, and a couple of three other things. It doesn't maybe explain everything, but it goes a long way for most products. So we talked about taste and preferences as one of those non-price determinants of demand. Then we also talked about income as a measure, a proxy for ability to pay. Remember, demand and want are not synonymous, totally synonymous terms. I can want something without having a demand for it, because demand involves not just a willingness, a desire to purchase, but also in some fashion the ability to use it. So the ability to pay factors in as well for demand. So it's willingness and ability. And so the variable that we use to sort of represent the wherewithal to be able to buy more, the ability to pay is income. Most people get most of their ability to pay the wherewithal to be able to purchase goods and services by usually offering their labor services and labor markets in return for wages, salaries, and other labor compensation that's usually the main source of income. But it could be other types of income, so wages and salaries, dividend income, interest income, rental income, profits, or proprietors' income if you're in business. So there could be other types of sources of income as well, which is called income generally. And we would expect that for most products, if you have a higher income, you're willing and able to afford more of the product. And so we would prefer those typical type of goods as normal goods. But there might be certain types of goods that as income goes up, people might actually demand less. And we would refer to those kind of unfortunately, we refer to those as inferior goods, which is really kind of an unfortunate label because an inferior good makes it sound like there's something distasteful or defective or bad or not up to snuff for the particular product. And that's why as people's incomes go up, they shift away from it. And so we call those inferior goods, but it's really just atypical goods. It's just goods that just so happens, as people's incomes go up, they shift away from other things. And conversely, as incomes go down, they tend to shift towards those things. Those products could be distasteful, could be defective, could be bad in some fashion, but do not be, and often are not. So the examples then, they're often given, quite an essential example is ramen noodles. Because they're so darn cheap. You can buy, you know, several packages of ramen noodles for a couple of three bucks. They tend to be something that lower income people, presumably, that's very affordable. College students often are said to live on ramen noodles. I don't know if that's actually true, but that's the story that's given. I don't know if you all do, live on ramen noodles.We probably don't sell, we'll probably go feed you to them ramen noodles in the capital. It's actually a pretty good pair. But, you know, the story is, you know, if you're sort of on a limited income, like a college student is, you're often having to buy those kinds of products, like ramen noodles, maybe canned spaghetti, spaghetti rolls, that sort of thing. There's nothing wrong with those things. They can be quite tasty, but it does tend to be the fact that as people graduate, get jobs, be paying jobs and such, that they tend to shift away from those types of products. Conversely, as people lose their jobs, as their incomes go down, they may be increasing their demand for these types of goods. So we would refer to that as, to those types of goods, goods that have the property and characteristics that as people's incomes go up, they tend to reduce their demand. As people's incomes go down, they tend to increase their demand. If that's the case, then we would refer to those goods as inferior goods. Whether ramen noodles really are inferior goods, whether spaghetti rolls really are inferior goods, whether mobile homes perhaps, they're often regarded as starter homes. Once your income goes up, maybe you can shift out of a mobile home and get into a regular house. Those seem like pretty good candidates for being inferior goods, classified as inferior goods. Whether they are or not really is dependent upon whether people actually behave that way, whether we actually observe people shifting away from certain products when their incomes go up. It could very well be if they did a very careful market study, which is very difficult to do, but if you did a very, very careful market study, you might find, in contrast to your expectation, you may be thinking that ramen noodles is an inferior good, but you might observe, gather the data, and they may not support that. They may not be true. It's not necessarily the case that since it's ramen noodles, it's an inferior good. Since it's spaghetti, it's an inferior good. They seem like pretty good candidates for being inferior goods. It could very well be that there are some goods that we would not expect, that we wouldn't think. I don't know what they might be, but there might be some goods out there. We'd be surprised to learn that as people's income goes up, they actually support it. They might be, they could very well be. The next non-price determinant, and again, all this is coming from the review, the summary outline that's posted on Moodle that hopefully, as a request, is that you sort of download, print off, and have with you to help as we go through this. A third non-price determinant is the prices of related goods in consumption. Let me kind of pick up from there. There's two types. Here, I'm saying it's a non-price determinant of demand. A critical non-price determinant of demand is price. But it's not the price of the good itself. It's the price of some other related goods. You could have a good ex whose the amount that people wish to purchase, the demand they have for the product, might in some way be impacted by the prices of other goods that are related in some fashion. There's usually two ways that we look at that. They could be related in a substitutionary fashion or a complementary fashion. Let's look at that first one, substitute goods. I might have an example here. Typically, the most common example used to illustrate substitute goods is Coke versus Pepsi. I'm not going to use Coke versus Pepsi because I'm going to be more creative than that. I find Coke to be a refreshing, bubbly, cold beverage. I find Pepsi to be deadly poison. To me, they're not the same. I would not buy Pepsi. It's not related just because Coke might be more expensive than Pepsi. I'm not going to shift my demand over to Pepsi simply because it's a little bit cheaper. To me, they're not the same. I can't use the Coke versus Pepsi example because it doesn't work for me. I'm going to come up with something using my very firm imagination. I'll come up with another totally different example. Totally from outer space, different type of example. That's going to be Dr. Pepper versus Mr. Pibb. Now, I have to say Mr. Pibb. Does anybody know what Mr. Pibb is? Because actually, Mr. Pibb doesn't exist anymore, does he? Well, as Mr. Well, as Mr. Pibb? Oh, Mr. Pibb, isn't that what he meant? No, Mr. Pibb. Is it true? Yeah, it's true. They serve it at Chipotle. Really? Really? Is it called Mr. Pibb anymore? No, it's Dr. Pibb. Now, it's Pibb Extra. I'm not going to call it that. I'm just going to call it by Mr. Pibb because I'm just too old to change now. But what is Mr. Pibb or Pibb Extra? Mr. Pibb is nothing more than the Coca-Cola Company's version of Dr. Pepper. So we've got these two, and if you prefer to call it Pibb Extra, go ahead. They may have actually infused more extra caffeine. I think that's where the extra comes from. I'm not sure. Does anybody drink Pibb Extra? But Dr. Pepper, the main difference between Dr. Pepper and Mr. Pibb is that Mr. Pibb has periods after Mr. Dr. Pibb is not a period after Pepper. Used to, a long time ago, somewhere along the line, many years, maybe decades ago, the period fell off of Dr. Pepper. So check it out, you know, it's Dr. Pepper is not a period after Dr. Pepper. So that's really the only, otherwise they're both bubbly, refreshing, Dr. Pepper-y tasty beverages. Very similar, at least to me. So maybe not to everybody. But to some people like me, or at least let me be a critical mass of people. Find them kind of related enough so that if I were to go up to United, and I was going to pick up some kind of beverage there, and maybe I'm normally going to be getting Dr. Pepper. And so let's illustrate the Dr. Pepper and Mr. Pibb. Let's illustrate them with two graphs. So we'll have in the left-hand graph, this is going to be the market for, at least the demand for Dr. Pepper. And this over here will be for Mr. Pibb. And let's say that initially we've got a downward-sloping demand curve in the market for Dr. Pepper and a downward-sloping demand curve in the market for Mr. Pibb. And let's say initially both are selling for the same price. Let's say $0.99 for a two-liter bottle. I don't buy two or a dozen. In fact, I buy very little, I don't get a little bit older, very few actually, colder beverages anymore. Twoliter bottles, that's like the plastic bottle. How much things go forward? So hopefully it's not too wildly unrealistic to say, let's say they're both going for $0.99 bottles. So if I go over to the demand curve and drop the line down, let's say that's the quantity demanded for Dr. Pepper, initial quantity demanded. And over here for Mr. Pibb, let's say that is the initial quantity demanded for Mr. Pibb. Then let's say for some reason, we don't know why, but let's say that for some reason there is an increase in the price of Dr. Pepper holding everything else constant. So let's say that it's an increase from, oh, I don't know, $0.99 to let's say $1.29. So 30-cent increase in the price of a bottle of Dr. Pepper. So I can imagine somebody like me, you know, if I'm going to the store, let's say I didn't want to buy a bottle of Dr. Pepper, and I'm going down the aisle and I look at, I'm about ready to pick up a bottle of Dr. Pepper, which I know is about 99 cents, at least it was last week when I was shopping last week. Whoa, wait, it's $1.29. Oh, that's too rich for my blood, so. Well, maybe I won't buy anything. You know, maybe I'm just not going to buy Dr. Pepper. So it might be that there's a number of people, not everybody, but some people would say, I'm going to reduce my quantity demanded for Dr. Pepper. Okay. And that would be the law of demand at work. So what we would see graphically is we would move from this initial point on the demand curve for Dr. Pepper to another point that we'll call, say, QD prime. So there's a decrease in the quantity demanded for Dr. Pepper. In this case, there's going to be some amount. I don't have it specified how much that would be, how many bottles that would be. But maybe it's 1,000 bottles or 20,000 bottles. Who knows? Well, some of those people then might say, if I can't have Dr. Pepper, I don't want anything. I'll just skip it. I won't buy anything else. I'll buy anything. Or they may say, well, you know, I'll buy some saltines or something instead. But there's a good chance that they'll say, well, I still really wanted some Dr. Pepper. $1.29 is too expensive for me, but I know that there's this thing right over there, real close, that is very, very similar to Dr. Pepper. It's not exactly the same. It's close enough. Pick that up instead. It's Mr. Pepper. Or if you're at, you know, it could be, and I can't remember which ones, which. If you're at United, there's going to be some United version of Dr. Pepper. It used to be called Dr. U, I don't know what it still is. At Walmart, there used to be something like Dr. Wow or something like that. So there might be a generic version of Dr. Pepper, store brand version of Dr. Pepper that people might get. I wouldn't. Some people might do that. It's cheaper. But for me, Mr. Pitt is pretty close. So I might easily shift over to Mr. Pitt is pretty close. So I might easily shift over to Mr. Pitt because it's now relatively less expensive. Its price hasn't changed. So again, ceteris paribus, the price of Mr. Pibb is still 99 cents per bottle. But then some of these people, some of these people right here, there's been a decrease, a change in the quantity demanded for Dr. Pepper. Some of these people, not necessarily everybody, maybe not even most, but some sort of critical mass migrate over to this other good and by Mr. Pibb instead. So the decrease in the quantity demanded for Dr. Pepper may lead to, again, not necessarily all of these people, maybe not even most of these people, maybe 30 percent. But some, some people might then shift over, migrate their demand over to Mr. Pibb. Well, Mr. Pibb's price isn't any different than it was before. And yet people are now buying more at that unchanged price. So what's happened is the fact that this demand curve that was constructed predicated on the price of Dr. Pepper being $1 being 99 cents a bottle is no longer operative because now the demand is, for Mr. Pibb, is based upon the price of Dr. Pepper being $1.29. So that initial Dr. Pepper, that initial demand curve goes away, is replaced by a new demand curve somewhere to the right of the initial demand curve. So there's an increase in the demand for Mr. Pibb. So we might go up here and say that the increase in the price of Dr. Pepper, everything else on constant, might lead to an increase in the demand for Mr. Pibb. Or substitutes, that is, consumers, some critical mass of consumers out there find them close enough that they would be able to switch based upon a change in price. So in general, if two goods, X and Y, are substitutes in consumption, an increase in the price of, say, good Y would lead to an increase in the demand for good X, again, holding everything else constant. And of course, it works in reverse. Decrease in the price of good Y might lead to an increase or a decrease in the demand for good X. Some examples. We've got all sorts of examples. There might be cars and then the car market right now, so I'm not sure which ones to consider or to bring up. But there's going to be a Honda type of sedan and the similar Toyota type of sedan. Probably a lot of consumers regarding this fairly substitutable, both high quality products, high quality, reliable sedans. The price of the Honda goes up, whatever that sedan type might be. That might cause people to move away from the Honda towards a similar type of Toyota. Classic examples used to be butter and margarine. Used to be, you know, you pretty much, that was your choice. Butter and margarine, now there's all sorts of, like, spreads of some kind. But with, you know, butter and margarine, they're both very similar, so they're kind of substitutable. A higher price of butter might lead to an increase in the demand for margarine. Some things like mayonnaise, miracle whip, salad dressing, that type of thing. Most people, I guess, might think of them as kind of similar to not everybody. Both of those things go for butter and margarine and mayonnaise and miracle whip salad dressing. My mom used to get miracle whip and she would get margarine. And I would say, Mommy, Mommy, why don't we get, you know, real butter and why don't we get, like, real mayonnaise? And she'd say, shut up, they both taste the same. Well, as I grew older, I realized that that was not true. At least to my taste, no butter actually tastes better than margarine. Mayonnaise is better than miracle whip. But to a large degree, you know, they're very similar. And so there is going to be a relationship there with the price of butter goes up. We could see an increase in the demand for margarine. Tuition is an issue there. So here we have LCU, of course. The price is going to college. Tuition. Be kind of careful, of course, how you price your product. Because there are, there are substitutes. And the substitutes around here, the co-substitutes would be Tech and South Plains College. Wayland, perhaps. Could also be Adeline Christian. Kind of relatively close to the Church of Christ affiliation. So with all those different types of things, you have to kind of be a little bit careful about how you price your product. That's your tuition simply because there are other options. So that's one way, one type of way then that demand for a good X could be affected is by changes in price to some kind of related goods and consumption. The second type would be, say, complementary goods. So two goods would be complementary goods if an increase in the price of, say, good Y leads to a decrease in the quantity, excuse me, in the demand for good X. And complementary, they kind of go together. So it's go together with an, it's complementary with an E, not complementary with an I. So complementary would be, with an I, would be if you're paying somebody a compliment. So if I were to say to my wife, oh, Jennifer, you are so beautiful, I would be paying her a compliment, you know, with an I. If, on the other hand, I said to her, hey, you know, we're a good team, we go together well, you know, I would be saying that we complement each other with an E. So it's in that sense that we're saying complementary goods go together in some fashion. So example might be, if you all play golf, are there golfers in here? You all must be wealthy beyond belief to be able to play golf, because when I was a young man, I used to think, you know, I'd be out playing golf all the time. As I got older and able to afford it, and it's like, well, I found I could afford it, but I say, well, you know, I'd actually like to be able to pay my mortgage. I mean, it's expensive to play golf, particularly if you rent a cart, electric cart. So golf can be pretty expensive, and truthfully, the thing that makes it expensive for me isn't the money expense. It's a time expense. It's hugely time consuming, you know, if it's, you know, playing golf, you know, it depends on how well you play, I guess. But, you know, nine holes of golf can be two, three hours or so, and, you know, 18 holes, that's basically a whole afternoon, maybe close to a day, depending on how you play. So the time cost is really the thing that put me out of the golfing market quite a while ago, as I scan for the time that it takes. But just the monetary cost is actually pretty high as well. And so if, for example, there was an increase in the price of playing golf, now there's a particular term that's used for that. You know, actually, when you go to, you know, go to a golf course, you know, play, you have to pay what I refer to as day. That's the magic word. They don't just say, here's the price, as they call it then, the green seasons, yeah. So it's a fee to play on the course. So let's say there was an increase in the price of golf. Maybe this is, you know, this could be happening, you know, over a season. Maybe it's happening, drifting up over time, perhaps, however it might be. But as the price of golf goes up, the price of actually playing golf goes up, by the law of demand, we would predict a decrease in the quantity demanded for playing golf. That's just the law of demand at work. But if it's true that the price goes up and people are playing less golf, what do you think is going to happen to the demand for golf *****? Everything else though, constant, which I always need to put that on here, ceteris paribus, we would predict that that probably would cause a decrease in the demand for golf *****. Because here, you know, what else can you do with golf ***** besides play golf? I mean, you need to, you know, fling them at your little brother and sister. But other than that, what else can you do with golf *****? So if people are playing less golf, they're almost assured they're going to be buying fewer golf *****. So that's a pretty good straightforward example of complementary goods in action. Two goods, you know, that are such, that are tied connected in such a way that the consumption of one affects the consumption of another. So that if the price of one goes up, it might cause the price of some complementary, the quality purchase of some complementary things to go down. You might say like hot dogs and hot dog bonds, I guess. The fourth non-price determinant of demand is going to be buyer's expectations. And this one is really important, but it's also one that's harder to, it's harder to be able to have a nice little quick diagram that says changing expectations causes this. Because you can't have, you know, up above here you have this nice little, oh, golf and golf ***** are complementary goods. So an increase in price of golf leads to decrease in demand for golf *****. So you just ride out a little schematic like that. But you can't, but if I were to say something like this, what would happen to the demand for X if there's an increase in expectations? Everything else held constant. So suppose there's an increase in expectations. What's going to be the impact on demand for X? Good X. What kind of expectations? Whatever you need. So it's almost, with this, you almost always have to have a story of some sort to go with it. So you can't just have like a nice little, oh, increase expectations causes an increase in demand for X and just memorize that. Well, this is not going to work. So what kind of expectation? So I ain't going to, that's not going to fly. So you almost always have to have some kind of story to go with this. So here's one. Suppose we're talking about, let's say that there is reports of a freeze in Florida. Well, we know, of course, that Florida is a source of a lot of citrus fruits, including oranges. And so let's say that you think, well, that freeze is probably going to lead to, or people have this expectation, that's going to sort of wipe out a bunch of the orange crop. And the expectation is then that is going to increase the price of, let's say, orange juice. So the expectation might be formed that the price of orange juice is going to be going up. And so if I love orange juice, I wake up in the morning and the radio is on, and I hear the news reports, say, hey, looks like there's a big freeze in Florida. You don't know what's going to happen with the citrus crops and oranges. Who knows? Oranges may have been wiped out. And I might say to myself, oh, my gosh, this is going to make orange juice really expensive because the supply of oranges is going to be decimated. So I might bolt out of my bed and throw something over my jammies, get in the car, rush over to United, get a cart, go to the refrigerated section, find the orange juice, and just fill the cart with a full of orange juice today at the current price because my expectation is the price is going to go up. So I might increase the demand for orange juice at the yet unchanged price. But I could be wrong. I might get home and put the OJ on my fridge, stack and pack it in my fridge, all those cartons of OJ that I got, and then turn on the TV and say, oh, false alarm. It never even got below 32 there. It wasn't even close. There was no freeze or whatever. It was just way overblown. And so it could very well be that it didn't happen. The expectation was that the price of orange juice would go up. I acted accordingly. I acted based upon my expectations. The expectations weren't realized. But nevertheless, I acted. And so the increase in the demand was not because the price changed, but the expected price changed, the expectations of the price changed. And expectations, of course, are hugely important in all sorts of different aspects of economic life. And people respond to those expectations, but doesn't mean the expectations are going to be fulfilled. But nevertheless, people act on those expectations. So for example, if there is a recession or reports that the economy, there's an economic downturn, there's reports about higher unemployment, people losing their jobs, people getting laid off, and you're kind of concerned that that might affect you. And so you perhaps change your behavior a little bit. You were going to go for a nice long vacation. That better or not, you know, better not make that expenditure, better save some money. Maybe I don't go to the steakhouse as often with steak. If I go to a restaurant, maybe I go someplace cheaper than I normally would. Maybe I buy us cheaper JCPenney's sport coat instead of going to a men's warehouse or someplace and getting a full suit. Who knows what it might be, ways that I might kind of change my behavior out of the concern. Now, here are these reports about layoffs and fears that that could affect me. And I better kind of retrench a little bit. And then let's say I'm at work and I get a phone call, you know, from my boss that says come to my office and say, oh, gosh, it's calm. Yeah, it happened. You know, I'm going to lose my job. My income is going to go down. And as my income goes down, of course, my demand for all sorts of different types of goods is going to go down. So I go to the boss's office with great trepidation. Go inside and he says, congratulations, you've been promoted and you're going to get a raise. Oh, well, that's great. Your expectations or your concerns or fears and such turned out not to be realized. Nevertheless, you acted upon them. The expectations, the concerns and such that filled your head led to your acting in a certain way. So it should reduce the demand for a number of different products. And again, the expectation might have been of something that never came to fruition. But nevertheless, you acted based upon the expectation. So buyer's expectations are going to be hugely important in what happens in the economy, but it's also something difficult to know because you can't sort of like unscrew people's head and look inside and see what their expectations are and see what they're thinking and how they're behaving and how they're changing their consumption patterns and consumption behavior based upon what they think might happen as opposed to what actually has happened. A fifth, non-price determinant, and I use this one mainly to be sort of consistent with the textbook. They put characteristics of the population or I might say demographics. A good example and the same example that's used in the textbook is you might think about as people get older. So we have this population change. We have the baby boom generation, which is usually dated from people born approximately in 1945 or six to about 1964. Those people, so there's this big sort of bulge of people that were born during that period, which is the baby boom generation, those people went through their prior earning years in the 1990s and thousands, early thousands, starting in the early thousands. They started the term like in their 60s and they start retiring. Now the baby boom generation is anyone from around 60 to 80, almost 80 cohort in terms of age. Well, just think about the kinds of products that people in that cohort purchase. Well, one of those things is like health care. So there's probably a lot more an increase in demand for health care items as we move through, as the baby boomers move into retirement years, probably increases the demand for medical services. And you might say, well, you could say if people are buying more, everything else sell constant, people demand more medical services. One thing you might say is, well, maybe people have more of a taste. They're buying more medical services because they have a taste for that product as they get older. You could throw it in under taste, but another, you know, is it really taste that's driving it or is it simply sort of the stage of life, demographic characteristics, that is determining that people of that age demand more medical services. But it is definitely the case then as people, as that baby boom generation, that cohort gets older, there is an increase in demand for medical services. This may not be all of them. There could be others, but that goes a long way. These five non-price determinants of demand, six including the price of the good itself, goes a long way in explaining variations in how much people are willing and able to purchase various products. And so we'll say that those are the main non-price determinants of demand. Now, your textbook actually includes another one and that is the number of buyers in the market. So you could say, so again, the textbook includes number of buyers in the market, but I personally think that's simply a manifestation of the next topic, which is market demand. So you could think of the number of buyers in the market as a determinant of demand and non-price determinant of demand, but it's really just a manifestation of the fact that you have more people in the market, it's going to increase the market demand. So define market demand as the horizontal summation of individual demands. More specifically, individual quantities demanded at each possible price. Let me do an example here. Let's say that initially the market demand for good x is composed of just two individuals. And using my fertile imagination, let's call them individuals A and B. A and B are simply for them. And so in this case, I want to put together four graphs horizontally. And so I have to kind of do that carefully here. So let's say that this first graph is going to be showing the demand for good x by individual A. And this is going to, the second graph is going to show the demand for good x by individual B. So let's say we have some very simple numbers. Let's say we put $2 per unit here, $1 here, same thing over here. Well, let's say that for good x, let's say that good x initially, if the price of good x was $2 per unit, let's say that the demand, quantity demanded by individual A is 10 units. The price is say half of that. Let's say it's just a dollar. Let's say that at a price of $1, individual A demands 20 units. The price goes down, quantity demanded goes up, the flex is law of demand. We've got two unconnected dots. That's an abomination, so let us connect those dots. And that will, we will refer to that as the demand curve by individual A for good x. Let's say that for individual B at $2 per unit, individual B also demands $10, 10 units at $2. But for individual B, let's say if we cut the price in half from $2 to $1, the quantity demanded only goes up to 15. Unconnected dots, such an abomination, so let us connect those dots. And that will be the demand by individual B for good x. Now, let's say that we want to calculate or find the market demand for x. That is, the demand for good x by the entire market consisting of two individuals. Well, obviously, it's going to be some kind of adding up of all the individual demands. Unfortunately, there's only two demanders here, so it's going to be fairly easy. So we'll just say, look, at a price of $2, at a price of $2, A demands 10 units, and B demands 10 units. So market-wide at a price of $2, the quantity demanded is going to be 10 plus 10 equals 20. And then the price of $1, and we want to compute the market demand. The quantity demanded by the market at a price of $1 is going to be 20 plus 15 equals 35. Connect the dots, and that will be our market demand curve that I will denote as demand A plus B. So again, the market demand is simply the aggregation, the adding up of individual demands. More specifically, it is the adding up of the individual quantities demanded at each possible price. So we can also take $1.50 here, $0.50, $3, you have it, you'll need to. Two points will enable us to connect those dots, and so we've been able to create market demand. It's simply the aggregation of the adding up of the horizontal formation across the supply with the various demand curves, adding them all up horizontally to come up with an aggregated market demand. Now, suppose then, everything else so constant, individual C enters the market. So this obviously is going to be represented by this graph here. And let's say that individual C's demand for good x is such that at a price of $2 per unit, individual C demands 15 units, and at a price of $1, let's say that individual C demands 20 units. Unconnected dots, such an abomination, so let us connect those dots, and that becomes the demand curve for good x by individual C. Now, let's say that we want to compute, we want to calculate, we want to find the market demand curve after there's been an entrance of an additional consumer into the market of individual C. Well now, at $2, A demands 10 units, B demands 10 units, and C demands 15 units. So at $2 per unit, the quantity demanded by the market is 35. At $1 per unit, the quantity demanded by A is 20, by D is 15, by C is 20, so it's going to be 20 plus 15 equals 20 equals 55 units. Connect those dots, and that becomes the new market demand curve, which is to the right of the initial demand curve. Well, so it just takes the old market demand curve is basically replaced by a new market demand curve that now includes individual C. So graphically, visually, we see a rightward shift in market demand curve. So the textbook says that one of the non-price determinants of demand is the number of buyers of market, so that if there's an increase in the number of buyers of market, that should increase demand. There's fewer market participants, buyers in the market, shift the market demand to the left. And that's true, but it's also, in a sense, not really necessary to think of it that way, and it's probably not best to think of that way. It's simply a manifestation of the fact that if you have more buyers in the market, you have the market, everything else is constant, the market demand is going to be bigger. What makes that different, I argue, is from what we've looked at before, is if there's an increase in the number of buyers in the market, ceteris paribus, that means the demand by A is being held constant and the demand by B is being held constant. You're just adding a third of it. The demand for A and B, the demand for good X by both individuals A and B, are not changed. Pretty much by construction, by assumption, they're not changed when there is a change in the number of buyers in the markets, which is somewhat in contrast, then, with some of the things we've been looking at before. So, for example, we can think, if we go back to, let's say, income, with income, you can think of an individual's income as if the individual's income goes up, that will increase the individual's demand for good X if good X is more than good. Or we can think of it as, if there's an increase in income across the market, then that's going to increase demand market-wide across the market. Individual taste and preferences. You can think of the taste and preferences. If some of these individual tastes changes, they have an increase in taste of good X, we can see that the individual demand for good X is going to increase. We can think of it as the individual's demand can increase, if there's an increase in the taste, that affects the individual. Or if there's a number of individuals in the market, it can affect the market demand. If the market has an increase in taste, it can affect it. But with the number of buyers in the market, it's not going to affect the individual's market demand, or it's not going to affect the individual's demand. So an individual, if there's an increase in income, let's say this is a normal good, then this individual's demand curve might shift to the right. This individual's demand curve might shift to the right, and maybe this individual's demand curve might shift to the right, and therefore the market demand might shift to the right. But if it's simply an increase in the number of buyers in the market, that is, individual C comes into the market, if individual C comes into the market, that by itself is not going to affect the demand for good X by individual A or by individual B. They'll stay where they are. So it's not really a change in the, in one of the non-price determinants of demand. It's simply a manifestation of the fact that, yeah, if you add up the number of buyers in the market holding everything else constant, holding all the other individuals' demands constant, they're not changing. You add another one in? Yeah, it's going to shift with the market demand curve. But it's not going to shift anybody else's individual demand curve. But if we are talking about a market, if we are talking about looking at the supply and demand for good X, yeah, if we're talking about the market demand and supply for good X, an increase in the number of buyers in the market would shift the demand curve in the marketplace to the right, increase the demand. Before getting in then to supply and putting supply together, there's one more thing about demand that needs to be thought about, and that is the distinction between a change in demand and a change in quantity demanded, which probably sounds like it's the same thing. So am I saying the same thing when I say change in demand versus change in quantity demanded? When there can be two or more, right? So maybe that's the same. Is that the same thing here? Is change in demand versus change in quantity demanded? Is it just two different ways of saying the same thing? Here, no. There is an important, subtle but important distinction that's being made when I say change in demand versus change in quantity demanded. So for example, suppose, remember, recall we just did the Dr. Pepper versus Mr. Pibb or Mr. and Mr. Pibb. Recall there, I said, okay, suppose there was an increase in the price of Dr. Pepper and that led to a decrease in quantity demanded for Dr. Pepper and an increase in the demand for Mr. Pibb. So I don't know if you noticed at the time then when I did this, so they sound the same, but they looked at me. There's something different here about this, and that is because there is a distinction that's being made between a change in demand and a change in quantity demanded. Specifically, if we were to go back to that example here, and we see Dr. Pepper here, we said, okay, suppose there's an increase in the price of Dr. Pepper, so we move that from this point on the demand curve to Dr. Pepper to this point. So there's an increase in price that caused a decrease in quantity demanded for Dr. Pepper. The demand curve itself stayed where it was. Same time then it had this other effect where it caused an increase in the demand for Mr. Pibb, and we saw that, showed that graphically with a rightward shift in the entire demand curve. This demand curve was predicated on the price of Dr. 99. Pepper being $0. This demand curve is predicated now on the price of Dr. Pepper being $0.29. So the entire demand relationship has changed, so we say that there's a change in demand. So there is an important distinction that's being made. So a change in demand occurs when there is a change in one of the non-price determinants of demand, and graphically that would be exhibited by a shift either to the right or to the left, depending upon whether it's an increase or decrease in demand. The entire demand curve, as opposed to a change in quantity demanded, which occurs when there is a change in the price of the good itself. And that would be depicted graphically by a movement along a stationary demand curve. So there is going to be that subtle but important distinction to be made between a change in demand and a change in quantity demand. And it's going to come up on a quiz, and people will get it right. And that's the place to get it wrong, is on a quiz. Why? Because again, it's going to sound so similar. Change in demand versus change in quantity. I'll have some kind of question that might be something like, okay, suppose there was an increase in the price of good x. Everything else so constant that I might have four options. The increase in the price of x would cause a, an increase in quantity demanded for x, b, a decrease in quantity demanded for x, c, an increase in demand for x, or d, an increase in the demand for x. They're all going to sound so similar, but we just have to kind of think it through and then maybe make a mistake or so on the quiz so that we will have it ingrained in our minds. For the midterm exam, which is going to be approximately two weeks..because it's fairly important. Much of economics, economic theory, is such as based upon basic supply and demand analysis. Almost everything that we encounter at some point in some way can be even at higher levels of economics and somehow be traced to or connected with supply and demand. So it's a pretty important foundational model for economics. So we introduced the model first, kind of foreshadowing where we're going with that, then march through demand in some detail. Today what we want to do is do the same thing that we did with demand or do it with supply and then put supply and demand together and then see where that takes us. So we'll start then with supply and we'll define supply and formally define supply as the various quantities of an item that sellers are willing and able to offer for sale at various prices. That is our Latin incantation, ceteris paratus, everything else so constant. else so constant. And so again just like we did with demand, we might say, well, is there a hypothesis that we might conjure up with respect to price and quantity supplied? And a pretty straightforward hypothesis might be, as price goes up, would we predict that sellers would be willing and able to offer more or less for sale at higher prices? Higher prices would probably be induced to offer more for sale. What about the other direction? the other direction? Suppose the price drops, drops, drops down towards zero. We know, at least if the firm is a profit interested concern, sort of pursuing profits, it's probably not a good profit-making strategy to offer your product for sale at a price of zero. So we would expect that under most circumstances, if the price was zero, if the sellers were going to go through all the bother and expense and everything of producing a product and marketing it and trying to sell it, and they knew at the end of all that what they would get per unit of sales is zero. That is, nobody would be willing to offer it in the first place. So the price is zero, we would expect that the quantity supplied is probably going to be zero. In fact, it probably might take a little bit, you know, price goes up to a penny, well, two pennies and three pennies, four pennies, you know, depending towards what the price is, it might take a little while, you know, a certain positive price before the seller would even be willing, any seller would be willing to be able to offer even one unit per sale. But at some point, if the price keeps going up and up and up, we would say, well, that's going to start making it worth a while of the firm to try to sell more. So we would expect that everything else sell constant and not knowing any of the details about what the product is, we would predict, our hypothesis would be that price, the quantity supplied, probably positively or directly related. You never let there be one term for something when there could be two or more, so positively or directly related. The price goes up, the quantity supplied goes up, the price goes down, the quantity supplied goes down, they move in the same direction. And that would be, again, a theory, it's probably pretty sound theory, seems pretty compelling theory, and so that's one reason why we kind of don't even call it a theory, we call it the law of supply. So we have the law of demand, the law of supply, the law of demand says that, generally speaking, we would expect as price goes up, point demand goes down, law of supply says price goes down, quantity supplied should go down. They should move in the same direction. So, surprises is going to be pretty important, and price sort of takes a paramount position in our story, of trying to sort of explain what causes, in this case, sellers to want to offer more or less of a product for sale. The price isn't everything, just like prices wasn't everything for demand. Just the underlying taste for the product, remember, is pretty important too, can even be more important than price a lot of times, because perhaps there's, if you don't have a taste for product, you don't desire the product at all, you want the product, it's kind of irrelevant what the price is, without any taste for the product. So it's not to say that price is the be-all and end-all of determining how much people are willing and able to sell, it's buy a particular product, there's going to be some non-price determinants of demand as well. Same thing from the supply side, price is important, but it's not everything. everything. So there might be some non-price determinants of supply. And what might that be? Well, again, it could be, you might think, well, doesn't it depend on what the good is that we're talking about? Product, the good and the service, the one that kind of vary from one good to another? Yeah, it will. But as with demand, there's a relatively small handful of non-price factors that go a long way to explain in variations in the willingness and ability of sellers to offer a product for sale. So what might some of those common, important non-price supply determinants be? non-price supply determinants be? One is going to be the underlying price of the inputs or resources that are used in producing the product. So let's say we have this particular example of, say, suppose we have some good here, and let me see if this will work. That's too big. All right, suppose we have some product, again, using my fertile imagination, I'll call it good X. So let's say that there's an initial supply curve. It's upward sloping reflective of the law of supply. So let's say there's some initial price, and let's call it something, let's call it P sub 0 for some initial price that this product, whatever it is, good X might be selling for it. But at that price, then, we draw a line over to the supply curve. We might find the quantity sold at that price. So at this particular price, the sellers will be able to sell this amount of product. Then let's say for some, you know, there's an increase in some resource, some input to the production. So maybe it's a seller of this product, seller of this product, a phone call from a supplier, some critical ingredient or key resource for something that is used in the production of this good. So they call up and say, hey, I'm sorry, you know, but we're going to have to raise the price of this key ingredient that you use in production for this product. Seller says, you know, seller of good X might then say, well, you know, that's too bad. And they may say, well, I'll find somebody else to sell it to me, who knows what they might do. But then one thing they might do is they might say, well, I might be able to, if I feel like I have to buy this key ingredient for my input supplier. I might go ahead and do that, but I might take that increase in price and sort of tack it on to the price of the product that I sell good X. So what I might do then, and if I'm successfully able to do that, I might shift that increase in the price of this key ingredient onto my customer in form of a higher price. So that would probably be the first inclination to do that, because if they were able to successfully raise the price to the customers and be able to receive the same amount as before, by seeing how to red new till red new is before after doing that, then they're held harmless and basically no problems. That might be one attempt to deal with that. So let's say that this difference right here represents the amount of the price increase. So this, we'll call this P0 plus tax, not tax, that's last class period. So again, let me see, there's an increase in the price of some input for good X. So we might say, let's just take the old price and then just try to tackle on the higher input price. And if they were able to do that, the seller would say, no better, no worse off than it was before. Okay, suppose they were able to successfully do that. Suppose they were able to successfully shift the tax onto the buyer, not the tax, that's last class period, shift the increase in the price of the input onto the customer. And customers, let's say, go ahead and buy the same amount after the price increases they did before and therefore the seller would be held harmless. They've shifted all of the price increase of the input onto the customer. What would the demand curve have to look like for that? If they were successfully able to shift the entire input price increase onto the customer in the form of a higher price, what would the demand curve have to look like? We've got a couple unconnected dots there, right? And so the dots would be, if you connected the dots, it would give us a demand curve showing us the relationship between price and quantity demanded. And over that range, it would be vertical. So the demand curve would be vertical, it meets between these two prices over this price range. The demand curve would be vertical. Well, and that could be. Well, and that could be. That could happen. But what would that violate? What law would be violating if that happened? The decreased demand from higher prices? Yeah, which we call the law of? So the supply and demand? Well, specifically, in this case, the law of demand. So law of demand, again, says price goes up, point demand should go down. It should be an inverse or negative relationship between price and quantity demanded. In this case, that's not happening. Price goes up, customers continue to buy the same amount. Is that possible? Yes. It's possible. It depends on the good, though. If it's a good bond, it might depend upon the good, it might depend upon the situation, it might depend upon the time period. We're talking about maybe if we're talking about just a very short time period, it could be that customers don't have a lot of time to sort of adjust their behavior. They're kind of surprised. They need that product. And today, you just have to buy it. It would be something similar to like that with gasoline. If the price of gas were to go up, were to double, it's what, about $250 today? about $250 today? If it were to double to $5 a gallon tomorrow and your gauge was on E in the morning, probably what you grumble a lot, you should probably go ahead and buy it, although you might not fill the tank. Last week, when you filled the tank, it was $250 a gallon. You might fill the tank this week. It's now $5 a gallon. There may be a chance you don't fill the tank. Maybe you only put in $5 for now. But it could also be, I've got to do all the things I'm always doing. I'm going to have to fill the tank. There's no particular reason to think the price is going to go down tomorrow, so I might as well just fill it up. In those certain situations, you might say, well, you can envision where people might continue to buy the same amount even if the price goes up. But if you have any kind of ability to adjust your behavior, again, it could be, I can adjust my behavior by buying only 5 gallons and still filling up at $5 a gallon. Or I could say, well, at that price, I'm going to have to cut out a trip that I plan to leave for, or I'm going to have to carpool with somebody to school to work, or I'm going to walk to the store, take a bite. So you could adjust your behavior. But in the very short run, you may not have that much ability to adjust your behavior. So it could very well be that in the very short run. If the price goes up, you can continue to buy the same amount. But for most products, if the price was sort of to double, people would change their behavior pretty quickly. And for many products, immediately. Many products say, price, I'm not buying anything for twice the price. All of that has to do with something we talk about in the tail in the microeconomic school. So I don't want to give it all away this semester. Otherwise, you won't come back next semester. And we'll think you'll have everything. No, no, no, no. We've got to keep some of the fun stuff later. So that's what's when we get into that, we'll talk about something referred to as the elasticity of demand. And the elasticity is, how responsible are customers to changes in price? How responsible are sellers to changes in price? And that again might vary, depending on time considerations, what the product is, who the suppliers, who the demanders are, could depend on lots of different things. But for our purposes right now, we're just simply saying, in general, we would think that if the price of something goes up, we're going to assume that the law, without additional information as the contrary, we would generally say, well, the law of demand could dictate that some people at least are buying less. Now, it could be at the other extreme. It could be, and the other extreme might be, suppose the seller receives a phone call from their input supplier saying, hey, we're going to have to raise the price. And the seller might say, I can't. I'm in a cutthroat competition market here. I've got so many competitors. If I try to raise my price, my customers are not going to stand for it. They're going to walk. And they say, they will just totally walk. If I try to raise my price by just one penny, they're going to walk, and I'm not going to sell anything. So if it was at that other extreme, then we'd probably say, well, they can't change the price, so the price is going to stay the same. And so more than likely, then they'd have to find some other way to deal with that price increase. That even, in some way, increases the cost of production. And so we'd have to be sort of two extremes. In that case, we would have a demand curve that's not vertical, but a demand curve at least over this price range just for example. And neither one of those would we expect to be the general case. We'd expect a downward-sloping demand curve. But at the two extremes, this theoretically could be the case. But that, again, at least gives us two dots to connect, because, of course, we know in this class, most of the time, unconnected dots are what? They're an abomination, so let us connect those dots. And so what we have basically then is a new supply curve that's to the left of the original supply curve. So in general, we would think that as input prices increase, we would predict that that would lead to, so an increase in the price of an input for good x would lead to a decrease in the supply of x. Again, ceteris parabas holding everything else constant. And then, of course, vice versa, if input prices start declining, it would make it easier for firms to be able to acquire more of them and produce more. So we would expect an increase in supply, depicted graphically, by a rightward shift in the supply curve. Second non-price determinant of supply would be sort of technology improvements, innovation, productivity improvements. We could kind of say that as given the resources that we have, let's say there's some kind of technological innovation, technological improvement, or advance that makes our existing resources more productive. Then we would expect that we would be able to produce more at whatever the going prices would be. So we would think if there's an increase in some new increase in technology, that that would be reflected by an increase in supply, graphically, depicted by a rightward shift in the supply curve. So you might think if the product we're talking about is, let's say, dirt moved or holes dug, maybe. Well, let's say here I'm a laborer. Well, let's say here I'm a laborer. I'm one of many laborers. My job is to dig holes in dirt. Well, if it's just me, I've got hands, as long as I guess I've got hands, digging the dirt, and there's a certain amount of dirt that I can move in an hour. What if I'm given some new technology? What if I'm given some new technology? Like, hey, there's been this technological advancement here. It's called the shovel. So they give me a shovel, and once they teach me how to use the shovel, I'm the same worker, same laborer. But now I have this new technology, and it's enabling me to be able to move a lot more dirt in one hour than I was before without that. And then, suppose they have an even newer and better and shinier kind of technology. Let's say a big steam shovel. So they bring in a big steam shovel, a big thing that can pull up lots of dirt all at once in a big scoop. Well, same laborer, but now once they teach me how to work the steam shovel, how much dirt can I move in one hour in that way? In this case, produce more moved dirt. So obviously, technology is a huge, important, non-price determinant of supply. Another important non-price determinant of supply might be what we'll just call natural conditions. And that's sort of the big umbrella term for things like, let's say this is an agricultural area. Suppose there's a drought. We produce a lot of cotton in this region, but if there's a drought, we don't produce so much. If there's really a huge drought, obviously a drought is going to lead to a decrease in supply of cotton. On the other hand, weather conditions are good. We get good rainfall, of course, with cotton. It's not just that you get rainfall. You have to get rainfall at the right time and the right amount. If you get the right amount and right time, the cotton supply would be very great. It would increase the supply of cotton. It could also be things like natural disasters, hurricanes, earthquakes. Those things, of course, are going to affect certain places and certain types of products. Agricultural goods, of course, are very susceptible to any kind of natural conditions, droughts and corn canyons. But other products can be affected by natural conditions. When there's a hurricane that goes through the Gulf, it can affect the fishing industry. The amount of fish that could be taken out of the Gulf might be affected by a hurricane. It could also be that all platforms go offline, petroleum refineries that are often located right along the Gulf. They often go offline for a while. COVID, of course, is an interesting experience where we have this natural condition. I'm not sure sometimes how natural it was, but it's just a thing that resulted in these economic shutdowns of all sorts of different natural conditions. As a matter of fact, that was kind of unusual because it affects so many different industries, so many different products and services across the region, the country and worldwide. So natural conditions, obviously, are important. Non-price determinant supply. Many of those are temporary or transitory, but sometimes they might be longer term impacts. The fourth nonprice determinant might be, let's say, expectations. We had expectations was one of the non-price determinants for demand. It could also be a non-price determinant for supply. And as was the case with demand, we can't just say, oh, let's say there's an increase in expectations. What is going to be the impact on the supply of X holding everything else constant? So what happens, what does that mean? It depends on what expectations we're talking about. So we don't have some nice little diagram here saying if expectations go up, supply of X goes up. So it depends on what those expectations are. And this is fairly critically important determinant of supply. And this might incorporate here some of the most critical aspects of supply demand. What is it that is driving people to get into a market to produce a product and try to sell it? And some of those is profits, profit potential. So it's obviously an important thing. I think this idea here of a product that doesn't exist, that people would like this product, and they'll be willing to pay for it. And so I'm going to gather resources, get into that business, and start producing that product because I expect a predict, a desire, profits down the road sometimes. Or it could be, I predict, I think, I expect that the economy is going to be booming in a year or two in my area, in my industry. So maybe it's time that we try to take advantage of that by building new factories. So I'm going to gather my resources today, build a new factory, and it's going to take a year or two maybe for the factory to get up and running. But by that time, I'll be able to produce at a greater scale than I am currently, and my profits are going to go up. And so that profit motive might drive me from that, the potential, the expected future profits, which may not happen, may not come to fruition, often doesn't. Nevertheless, people have acted on those expectations. And the supply of a product might go up due to their expectations, and it could be the expectations where unrealistic or regardless become unrealized. Nevertheless, they increased their production and produced this product more based on those expectations. This is also where we might put the entrepreneurial impulse. Anybody go to Mr. Anybody go to Mr. Skidmore's presentation at lunch today? Nobody? It was a whole bunch of people. None of y'all will know. Didn't get free lunch? Free lunch? Free lunch? You gave up the opportunity for a free lunch. Well, I guess that's something I used to remember. Everyone's got a good one. So maybe one day. Well, that'll teach you. Don't be taking classes very much. So anyway, it's part of the entrepreneurship. There's like an entrepreneurship innovation series that Dean Mack is stirring in this semester. And I don't know when they're all going to be on Wednesday. I'm hoping they're not all going to be on Wednesdays at lunchtime. But they might be. I don't know. But Mr. But Mr. Skidmore is definitely an entrepreneur type, and he was talking about, you know, desire to sort of be your own boss and to create something. And yeah, profits are part of it. Desire for profit. That's not always... Not always all that there is. And most of the time it's not all that there is. There's something more. What is it that drives people to want to be in business, have their own business? Well, it's often something that's sometimes indefinable. There are some people that are just driven. I want to create. I want to build something. I want to be my own boss. And all that, profits are important to that, but that's not all that it is. So there might be people's expectations of themselves and what their future is going to be. And I want to build a company. I want to produce something. Or I want to get into a particular industry and compete with others, because I think I can do it better than others. And that might lead to that kind of entrepreneurial spark. Might be the thing that drives the supply of products every time. And not to say that profit expectations or desires aren't important, but may not be the only thing. It may not even be the most important thing. So where does entrepreneurship fit into the economics story? Well, it's kind of here, kind of within this sort of broad realm of expectations. And again, expectations are difficult to know. We can see what the prices are of our competitors' products. You can see, for example, the price of gasoline. They're posted every day. So you know what the price of gasoline is. You can adjust your behavior according to that. And there's other products. You can go to the store and see what the prices are. And if you're in the business, you can kind of know what your competitors, what they're producing, what the prices are that they're charging for that, and adjust your supply behavior accordingly. And we can kind of observe some of this. But expectations, the thing that kind of drives the entrepreneurial spark or edge or bent that people have, you can't unscrew people's heads, look inside and see, and measure it. It's just something that's there. It's difficult to measure, but you know it's there. And you know it's important. So I bring this up sort of as a big deal to say, because I'll say, hey, this is really important. Entrepreneurship is important. It's sort of the entrepreneurial bent and spirit and drive. And that's all we'll talk about. That's the end of it. So if you want to know more about entrepreneurship, take a management class. You just know it's important. Here is, I don't know if any of y'all are, I don't have this sort of entrepreneurial spirit, at least not to build model business. And I might have some other fashion. But you know, that's not me. I never wanted to be in business. I never created a lemonade stand or anything. Anybody do a lemonade stand? Anybody do a lemonade stand? It's great. We meet people that will create lemonade stands. And sometimes it's thought, we've been asked sometimes to say, well, shouldn't the College of Business here have a program, a major in entrepreneurship? And that always, what always comes to my mind is this question that I kind of just leave you to think about is, can entrepreneurship be taught? Can you teach somebody how to be an entrepreneur? Or is entrepreneurship more like something people are born? It's their personality. It's the characteristics that sort of make them up. There are people, if you've ever met anybody that has sort of an entrepreneurial spirit to them, and you say, you know, if I do, I say, you can kind of tell this person is different than I am. And the ones that are really entrepreneurs, you can really tell very quickly. There's something about this, no doubt, pervades all aspects of their lives. There's something about their personality, their drive, you know, something in grad to a large degree. Is it something, can you teach somebody to be an entrepreneur? It's a question we talk about frequently or some of the faculty colleagues. It's an interesting question. My personal opinion is you can't really, you can kind of teach aspects of entrepreneurship. You can certainly teach people the skills that would help them be better entrepreneurs. But can you teach them how to be, to have the entrepreneurial spirit? I don't know that you can. Maybe somebody else will say, I think you can, but I say, I don't think you can. So I would say, you know, to somebody that says, well, you need to have a major in entrepreneurship, that's it. I don't think, you know, people will think that, you know, we're saying, we can teach you to be entrepreneurs. We can teach you certain things. We can teach you accounting and finance and marketing skills and basic economics and finance. And we can teach you some of those things that entrepreneurs need to succeed. Many entrepreneurs have an entrepreneurial skill or a bet, but they don't have these other functional skills and they are not successful entrepreneurs. I would say, so my personal opinion on the idea of a degree, a major in entrepreneurship is, I don't know, that would imply, you know, that, hey, get this major, you're going to be an entrepreneur. I can kind of see you being able to teach a class about entrepreneurship. But a class on entrepreneurship would involve things like your, you know, stories about entrepreneurs. Here are entrepreneurs, and this is what we did. No, we can't. So here, I'm going to teach you how to be Steve Jobs or Elon Musk. You can teach what Elon Musk has done and maybe how he got there and what strengths of his approach and what weaknesses of his approach it is. But you can't teach somebody to be Elon Musk. There is only one Elon Musk as well as Elon Musk. So I bring this up to make a big deal of it because that's all I'm going to say about entrepreneurship, probably Elon's semester. But that's not to say I don't think it's important. Now, those are four of these non-price determinants of supply. I'm not saying there might not be others, but those four go a long way. So, for example, one that I'm just going to mention but I'm not going to list is, you know, what about the prices of other goods? So remember with demand, we knew that the price, you know, an important determinant of demand for a particular good might be the price of other related goods like a substitute. So an example I gave, you know, was Dr. Pepper and Mr. Pepper. You know, if the price of Dr. Pepper goes up, that might lead me to shift my drinking behavior to Mr. might lead me to shift my drinking behavior to Mr. Pepper. My buy was more Mr. Pepper because the price of Dr. Pepper has gone up. If I find those two goods to be substitutes. Well, on the supply side, that's going to work as well. So if you're like a farmer, and this is very pertinent around here, you know, is cotton the only thing that farmers around here can plant and harvest? No, there's some other things, not too many other things. But what are so many, anybody brought up on a farm? What else? Well, like they have the pumpkins. Pumpkins, yeah. Theoretically, I mean, we do have up in Point A, we've got pumpkin day or whatever it is in October. Yeah, I mean, pumpkins are not, you know, well, you can't eat them. But, you know, it's a, you can't really, if you were to try to produce them in big bulk, I don't know that that would go over so well. But things in this area would be more like soybeans, Milo, which is, you know, like, I guess you get sorghum out of Milo. You have a few options. So if farmers see the price of cotton is going down, you know, next time they make their decision about how much acreage they're going to devote to cotton, maybe they cut back some of the acreage on cotton and plant Milo or soybeans or something else instead. Or maybe corn, but corn's a little iffy around here because it's so dry. But there is some corn that's produced in this area. So the price, you know, the relative prices of different types of crops might affect the supply of certain crops. An increase in, a decrease in the price of cotton maybe increases the supply of soybeans because farmers produce more soybeans in response. So just like there was on the demand side, there's going to be prices on the production side are going to be important. Prices of substitute production goods and complementary production goods as well. That is production goods go together. So, for example, beef. You know, if there's an increase in the demand for cattle and that's driving the price of beef up, that might entice cattle farmers, cattle producers to produce more beef. So an increase in the price of beef might lead to an increase in the quantity supply to beef. That's a law of supply at work. But then, and I don't want to upset anybody, but, you know, how do you get the price? Does the cattle producer and ranchers sort of go up to the elsy of the cow and there's a little zipper underneath and zips it and it takes out. You know, we say he wants to say he wants to zip it back up and that's not how it works. Sorry, but what do they do with elsy to the cow? So elsy gets dispatched. And then, well, there's this, you know, there's this carcass left over. What do they do? You know, so they take the, they take the elsy and then what do they do with the elsy's skin? They just throw it out. Leather products, you know, prices and wallets and boots and everything. So an increase in the price of beef could lead to an increase in the quantity supply to beef. That's the law of supply. And also an increase in the supply of leather because leather and beef are sort of complements in production. So I just emphasize that, yeah, prices are pretty important. Both complimentary goods in production and substantive goods in production on the supply side as well. Having said that, I'm not going to include it here. A couple of reasons. One is just try to keep the confusion at minimum because, and the, you know, because, so we're talking about substitutes and complements and just focus on the demand side for now as we find. It's also the case that it's not really directly talked about in the book. So I'm trying to be kind of consistent with how the book lists the non-price determinants of supply and they don't list this. So I won't as well. But I do want to say that, hey, that might be that those are important non-price determinants of supply as well, whether you have substitutes or complements in production. And there might again be others, but the ones that we have listed here, natural conditions and expectations and technology and prices of inputs. Those are four pretty solid, important non-price determinants of supply that takes us a long way. Now, just like with demand, there's going to be individual, you know, there'll be individual supplies. If we somehow add those all up, aggregate those supplies across all the suppliers, all the firms in the market, we would come up with some market supply. So we would define market supply as a horizontal summation of individual quantities supplied at each possible price. So, for example, suppose I had one, two, three, four, five, six suppliers of good X. And so we're saying, well, at a price of $4, firm A is willing to be able to offer four units. B is willing to be able to offer five. C, six, D, seven, E, three, F, three. And some of it says that the market wide, the quantity supplied by all market participants, all the firms, is 28 at a price of $4. And as the price goes down, by the law of supply, we would expect that the quantity supplied is going to go down for A and for B. And we see that market wide, then the quantity supplied should go down as well. If we were to, everything else held constant, add another firm, and using my fertile imagination, let's call that firm G. And let's say firm G at a price of $4 is willing and able to offer six units at $3, let's say four at $2, two, and at $1, eh, that's too low. And so they just don't. So if we add everything else held constant, okay, if we were to increase the, or have one new entrant into the market, one new firm enters the market, everything else held constant, meaning A, B, C, D, D, A, B, C, D, E, and F, all of those stay the same. Add one market, one new entrant, then yeah, the supply curve, the market supply will increase. So our new quantity supplied would be now 34 at a price of $4, 26 at a price of $3, 18 at a price of $2, and 10 at a price. All right, well, as we did also with demand, we have to sort of make that little subtle but important distinction between a change in supply and a change in quantity supplied. So when we say that there's a change in supply, that means the entire supply relationship has been altered. And graphically, that would be depicted by a shift in the supply curve either to the right to reflect an increase in supply or to the left to depict a decrease in supply. And where would these changes come from? And where would these changes come from? Well, they would come from shifts in the supply would be caused by changes in the non-price determinants of supply. So an increase in technology, everything else held constant, caused the supply curve to shift. The entire supply relationship changes, so we say it's a change in supply. As opposed to when there's a change in quantity supplied. So if we're initially, let's say at this point, at this price here, and then everything else held constant, there's an increase in the price of it as. We move from this point on the supply curve to this point on the supply curve. There's been, in other words, a movement along a stationary supply curve. So the supply curve stays where it is. We say that there's not a change in supply because the supply relationship has not changed, the supply curve has not altered. But we've just moved from one point on the stationary supply curve to another. So this would occur due to an increase in the price of the good. Holding everything else constant. Technology, expectations, questions of inputs, etc. So this can be, again it can be tricky on a quiz or a test because I might have a question that might say something like this. Everything else held constant, so the ceteris paribus, and increase in the price of a good. Well, again, everything else held constant, I might say, might be increase the supply of the good or decrease the supply of the good. Or increase the quantity supplied of the good. Or decrease the quantity supplied. So there's four options. One, strategy and discussion would be, yes, strategy. One, strategy and discussion would be, yes, strategy. Otherwise, say, well, you know, the first thing that's probably going to come to mind when you see a question like that, and you will, is, they sound the same to me. Aren't they saying the same thing? Aren't they saying the same thing? Or at least, you know, two of the things saying the same thing? Isn't increase in supply and increase in quantity, isn't that saying the same thing? Aren't these, aren't these saying the same thing? The answer is no. If the law of supply holds, and we're saying there's an increase in the price of the good itself holding everything else constant, then the supply curve is remaining stationary and we're moving from one point on the supply curve to another. It would be, in this case, right above there. It would be the increase in the price would lead to an increase in the quantity supplied, and our answer is going to be C. If you have a question like this, and you vary it, it always happens, because it's happened to me. I can't remember specifically what the question was, but I remember getting one or two questions wrong simply not by, by not accurately distinguishing between a change in demand or change in quantity demanded or change in supply and change in quantity supplied. It's just very common. It's going to happen because it sounds so similar in some distinction, some important distinction. Okay, well, so now we're pretty much armed with the basic details of demand and supply separately. Now we want to put it together so as to come up with some framework for sort of using it and answering questions and it's analyzing markets based upon the balance of supply and demand. So putting supply and demand together, okay, so we've got a downward sloping demand curve and an upward sloping supply curve. If you've got that, you're going to need somewhere. And so, look at that right there. I've got a downward sloping demand curve and an upward sloping supply curve. And what I want you to do is just for a moment, stare at it. Stare at it. Stare at the ground. Stare at the ground. Stare at the ground. Your eyes are getting sleepy. Your eyes are getting droopy. They probably were already were, but they were getting even drippier. Now, as you stare, don't you feel like you're like being pulled in. Yes, yes. Feel like you're getting pulled in. Like you'd be going in like a Harry Potter, you know, and go into another multiverse somewhere. So don't get too close. There is something significant because your attention goes right directly to that. directly to that. It goes directly to that. Is there anything significant about that? anything significant about that? And the answer is, of course, yes. There's going to be something significant about that intersection. Well, we'll see what it is trying to get at and what the significance of it is. So we'll put those two things together and say, okay, well, and both of those things are sort of happening independently. The demand side is happening independently of the supply side. If we go back, when we're introducing the model, we told the story about manna, the mythical product manna that used largely, you know, the thing we know about manna is there's no inventory issues you have to deal with. So we've got manna and then we have the story about, well, the sellers, you know, they are thinking about, they think that maybe the demanders, you know, that people might like this product that they don't know. So they produce the product and decide how much to produce and what to charge. And then we see what the buyers want. The buyers also determine sort of separately whether they prefer this product at all or there's a lot of different prices. So the demand and the supply sort of independently are generated and then put them together and they interact. And then signals are created that both sides sort of respond to and we refer that to that basically as like market forces as a summary term covering that idea. So, for example, then suppose, as we saw with the manna example, suppose initially the price was down here somewhere, call it, just call it a piece of zero, let's say. Okay. At this price, that's suggesting that the quantity supplied is read off the supply curve. Okay. The quantity demanded is read off of the demand curve. So we go over the demand curve, drop a line down there, that's going to be our quantity demanded. At that price, the quantity supplied falls short of the quantity demanded and that difference we refer to as a shortage. So the quantity demanded at that price exceeds the quantity supplied. And our story with manna was the manna producers brought manna to the marketplace, brought a certain amount there, charged the price. That turned out to be in effect too low because but midway through the day, they were done. All the boxes of manna were sold. And there were still people there that were offering that price of, I think it was $2 a box of manna. They were still offering $2 a box of manna but they were all out. So the quantity demanded at that price exceeds the quantity supplied, we call that a shortage. If, on the other hand, we had a price up here, at that price, we read the quantity demanded off of the demand curve, we call that quantity demanded sub 1, let's say, and then go over to the supply curve here and that'll tell us what the quantity supplied is at that price. At that price, the quantity demanded falls short of the quantity supplied. And in fact, what's happening in that case is the products, in effect, are piling up on the shelves. There's a surplus. Excess, supply, or surplus. They were out. They sold out. And there were still people that were looking for manna. They take that as a signal that, hey, you know, probably produce more and sell more at $2 a box or maybe we can produce the same amount of manna and charge a higher price or maybe some combination

Summary of Demand: Demand refers to the quantities of goods consumers are willing and able to purchase at various prices, assuming all other factors are constant (ceteris paribus). The law of demand indicates that there is an inverse relationship between price and quantity demanded: as price rises, quantity demanded falls, and vice versa. Factors influencing demand include:

• Consumer preferences (tastes): Changes in preferences can shift demand.

• Income levels: Normal goods see increased demand with rising income, while inferior goods may see decreased demand.

• Prices of related goods: Substitutes and complements can affect demand. For example, an increase in the price of Dr. Pepper may increase demand for Mr. Pibb.

• Buyers' expectations: Anticipated future price changes can influence current buying behavior, as seen in volatile markets.

Demand refers to the quantities of goods that consumers are willing and able to purchase at various prices, assuming all other factors are constant (ceteris paribus). The law of demand states there is an inverse relationship between price and quantity demanded; as price increases, quantity demanded decreases, and vice versa. Key factors influencing demand include:

• Consumer Preferences (Tastes): Changes in likes or dislikes can shift demand.

• Income Levels: Normal goods see increased demand with rising income, while inferior goods may see decreased demand.

• Prices of Related Goods: Demand can be affected by the prices of substitutes and complements.

• Buyers' Expectations: Anticipated price changes can influence current buying behavior.

The supply and demand model is a fundamental economic framework used to explain how markets operate. It consists of two main components:

1. Demand: Represents the quantities of a good or service that consumers are willing and able to purchase at different prices, assuming all other factors are constant (ceteris paribus). The law of demand states that there is an inverse relationship between price and quantity demanded—when prices rise, demand typically falls and vice versa.

2. Supply: Reflects the quantities of a good or service that producers are willing and able to offer for sale at various prices, also assuming all other factors are held constant. The law of supply indicates a direct relationship between price and quantity supplied: higher prices incentivize producers to supply more of the good.

Market Equilibrium: The intersection of supply and demand curves represents the market equilibrium price and quantity, where the quantity supplied equals the quantity demanded. Changes in either demand or supply factors can shift these curves, leading to new equilibrium points.

Overall, the supply and demand model helps to understand how prices are determined in a market economy and how they change in response to shifts in consumer preferences, production costs, and external factors.

The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity demanded by consumers. It typically slopes downward from left to right, illustrating the law of demand: as the price decreases, the quantity demanded increases, and vice versa. This inverse relationship reflects consumer behavior as buyers are generally more willing to purchase larger quantities at lower prices. Factors affecting the demand curve include consumer preferences, income levels, the prices of related goods (substitutes and complements), and buyers' expectations about future prices. Any shift in these factors can lead to a rightward (increase) or leftward (decrease) shift in the demand curve, indicating a change in overall demand for the product.

Quantitative demand refers to the specific quantity of a good or service that consumers are willing to purchase at various price levels. It is influenced by factors such as:

1. Price of the Good: The primary driver, as the law of demand states that quantity demanded decreases when the price increases, and vice versa.

2. Income Levels: Higher income typically increases demand for normal goods and decreases demand for inferior goods.

3. Prices of Related Goods: The presence of substitutes can increase demand for one good when the price of the other rises, while complementary goods typically see a drop in demand if their related counterpart's price increases.

4. Consumer Preferences or Tastes: Changes in consumer preferences can affect how much of a good is demanded at various price points.

5. Expectations of Future Prices: Anticipated price changes can lead consumers to buy more or less at current prices based on their expectations (e.g., buy now if they expect prices to rise).

Quantitative demand analysis is essential for businesses to forecast sales and make informed production decisions. It helps in understanding consumer behavior in relation to price changes.

Non-price determinants of demand are factors that influence the quantity of a good that consumers are willing and able to purchase, independent of its price. Key non-price determinants include:

1. Consumer Preferences (Tastes): Changes in consumer preferences can lead to increased or decreased demand for a good.

2. Income Levels: Demand for normal goods increases as consumer income rises, while demand for inferior goods decreases.

3. Prices of Related Goods: The prices of substitutes and complements can shift demand; for example, an increase in the price of butter may increase demand for margarine (a substitute).

4. Buyers' Expectations: Anticipated future price changes can influence current demand; if consumers expect prices to rise, they may purchase more now.

5. Demographics and Population Characteristics: Changes in population size, age distribution, and other demographic factors can affect overall demand for certain goods.

Non-Price Determinants of Demand: Non-price determinants are factors that influence the quantity of a good that consumers are willing and able to purchase, independent of its price. Key non-price determinants include:

1. Consumer Preferences (Tastes): Changes in consumer preferences can lead to increased or decreased demand for a good.

2. Income Levels: Demand for normal goods increases as consumer income rises, whereas demand for inferior goods decreases.

3. Prices of Related Goods: The prices of substitutes and complements can shift demand; for example, an increase in the price of butter may lead to increased demand for margarine (a substitute).

4. Buyers' Expectations: Anticipated future price changes can influence current demand; if consumers expect prices to rise, they may purchase more now.

5. Demographics: Changes in population size, age distribution, and other demographic characteristics can affect overall demand for specific goods.

Non-Price Determinants of Demand: These are factors that influence the quantity of goods that consumers are willing and able to purchase, independent of price changes. Key non-price determinants include:

1. Consumer Preferences (Tastes): Changes in likes or dislikes can shift demand.

2. Income Levels: Normal goods see increased demand as income rises; inferior goods may see a decrease.

3. Prices of Related Goods: The demand for a product can be affected by the prices of substitutes and complements.

4. Buyers' Expectations: Anticipated future price changes can influence current purchasing behavior, prompting consumers to buy more now if they expect prices to rise.

5. Demographics: Factors like population size and age distribution can impact demand for specific goods.

Non-Price Determinants of Demand: These factors influence the quantity of goods that consumers are willing and able to purchase, independent of price changes. Key non-price determinants include:

1. Consumer Preferences (Tastes): Changes in consumer likes or dislikes can shift demand.

2. Income Levels: Demand for normal goods increases as income rises, while demand for inferior goods decreases.

3. Prices of Related Goods: The demand for a product can be affected by the prices of substitutes and complements (e.g., an increase in butter's price may increase margarine's demand).

4. Buyers' Expectations: Anticipated future price changes can influence current buying behavior; if consumers expect prices to rise, they may purchase more now.

5. Demographics: Changes in population size, age distribution, and other demographic factors can impact overall demand for specific goods.

Demand in Economics: Demand refers to the various quantities of goods that consumers are willing and able to purchase at different prices, assuming all other factors are constant (ceteris paribus). The law of demand states that there is an inverse relationship between price and quantity demanded: when prices increase, quantity demanded decreases, and vice versa. Key factors that influence demand include:

• Consumer Preferences (Tastes): Changes in taste can shift demand.

• Income Levels: Demand for normal goods increases as income rises, whereas demand for inferior goods decreases.

• Prices of Related Goods: Substitute goods: Price increases of one good may increase demand for another (e.g., Dr. Pepper and Mr. Pibb). Complementary goods: Price increases in one may decrease demand for another.

• Buyers' Expectations: Anticipating future price changes can prompt current buying. For example, if consumers expect prices to rise, they may buy more now, affecting present demand. Understanding these elements is crucial for analyzing market behaviors and consumer decisions.

The Role of Supply and Demand in EconomicsSupply and demand are fundamental concepts that explain how markets operate.

• Demand: Refers to the quantities of goods consumers are willing and able to purchase at various prices, assuming all other factors are constant (ceteris paribus). The law of demand states that there is an inverse relationship between price and quantity demanded: as price increases, quantity demanded decreases. Non-price determinants include consumer preferences, income levels, and the prices of related goods (substitutes and complements).

• Supply: Represents the quantities of goods producers are willing and able to sell at various prices, also assuming all else constant. The law of supply indicates a direct relationship between price and quantity supplied: higher prices incentivize suppliers to offer more. Non-price determinants of supply include input prices, technology levels, and sellers' expectations.

• Market Equilibrium: The point where supply and demand curves intersect, determining the market price and quantity of goods exchanged. At equilibrium, the quantity supplied equals the quantity demanded. Changes in either demand or supply can shift these curves, leading to new equilibria.