What Most Economic Questions Can be Reduced To: Demand and Supply
Question for Thought: “An increase in the price of a product leads to a decrease in the quantity demanded, but an increase in demand leads to an increase in price.” Is this a paradox?
- Waymaker Module 2: Supply & Demand
- The Wall Street Journal
- YouTube Video: Supply & Demand: The Market Mechanism
- YouTube Video: Shifting the Demand Curve
- YouTube Video: Shifting the Supply Curve
- YouTube Video: Shifting Both the Supply & Demand Curve
- Robert Costanza and Lisa Wainger, “No Accounting For Nature: How Conventional Economics Distorts the Value of Things,” Washington Post, September 2, 1990.
LEARNING OBJECTIVES FOR TOPIC 2:
- You should be able to identify the major factors (e.g. price) that influence the quantity of some product a consumer will buy, and explain how each factor affects that quantity (e.g. a higher price leads to lower quantity purchased).
- You should be able to identify the major factors (e.g. wages) that influence the quantity of some product a firm will sell, and explain how each factor affects that quantity (e.g. higher wages lead to lower quantity supplied)
- You should be able to use the theories of supply & demand to analyze the effects of a disturbance (i.e. a change in supply or demand) on the market for some good or service. Analyze means determine how the disturbance affects the equilibrium price and quantity.
- You should be able to determine who gains and who loses from a price ceiling or price floor.