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Chapter 3 ECON 201 Note Summary
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Detailed notes, preparing for midterms of ECON 201 at Concordia microeconomics
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CHAPTER 3 DEMAND, SUPPLY AND PRICESI. Demand
1. Quantity demanded
- Quantity demanded of a product = The total amount of any
particular good or service that consumers want to purchase during
some time period
- Two important things:
It is a desired quantity
+ consumers want to purchase when faced with a particular
product price, other products’ prices, their incomes,
preferences, and everything else that might matter.
+ Different from the amount really purchased.
Insufficient: want to purchase may exceed the amount
they actually purchase
+ Quantity demanded = refer to desired purchases
+ Quantity bought/exchange = actual purchases
The flow of purchases:
+ expressed as so much per period of time: 1 million units per
day, 7 million per week, or 365 million per year has a time
dimension
+ The total amount of some product that consumers in the
relevant market want to buy during a given time period is
influenced by the following important variables:
Product’s own price
Consumers’ income
Prices of other products
Consumers’ preferences (or “tastes”)
Population
Significant changes in weather
Ceteris paribus:
- Holding all other variables constant/ “other things being equal,”
“other things given,”, ceteris paribus.
, - To analyze the distinct effect of changes in this one variable when
all variables are likely to be changing at once
Flows vs Stocks
a. Flows
- Has a time dimension – it is so much per unit of time
e.g: Two thousand dozen eggs per hour would indicate a much
more active market in eggs than would 2 000 dozen eggs per
month.
b. Stocks
- A variable whose value has meaning at a point in time.
e.g: 10 000 dozen eggs on September 3, 2022—is a stock variable
2. Quantity Demanded and Price
- The law of demand by Alfred Marshall: A basic economic hypothesis is that
the price of a product and the quantity demanded are related negatively, other thing
being equal
The lower the price, the higher the quantity demanded; the higher the price, the
lower the quantity demanded.
o Products are used to satisfy desires and needs, and there is
almost always more than one product that will satisfy any
desire or need
o If income, tastes, population, and the prices of all other
products remain constant and the price of only one product
changes:
+ Price goes up, that product becomes an increasingly
expensive way of satisfying a desire
Switch wholly or partly to other products/ stop
buying or buy less
+ Price goes down, the product becomes a cheaper way of
satisfying a desire.
demand more of it as they substitute away from
other products whose prices have not fallen.
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