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ECO101H1 Week 2
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Lecture notes of 6 pages for the course ECO101H1 at U of T (Week 2 notes)
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Chapter 3&4 Notes3.1 Demand
➔ Quantity demanded is a desired quantity, based on income, other product’s prices and
taste, the amount they purchase might be different that is known as quantity bought
➔ Some changes that can have an affect on the total amount of product that costumers want
to buy is,
◆ Products own price
◆ Consumers income
◆ Prices of other products
◆ Consumers tastes
◆ Population
◆ Significant changes in weather
➔ Quantity demanded must include a flow of purchase expressed as time, to give the
explanation meaning
➔ Ceteris paribus refers to when we want to measure something in economy. In economy
as one variable moves it is very likely that other variables move with it, we however like
to hold all variables constant expect for ceteris paribus to measure, and then do the same
for all other variables
➔ NOTE: The lower the price of a good ⇒ The higher the demand for the good
➔ As the price goes up, people will start to rely on the products substitute good and if the
price goes down is the other way around
Demand curve and shifts with the curve
➔ Income causes the demand curve to actually shift either to the left or to the right
➔ Any variable other than the products own price will cause the demand curve to take an
actual shift
➔ The 5 most important causes of shifts in the demand curve
◆ Consumer’s income
● As average income rises consumers have more desire for products, all
other things being equal
● This causes the demand curve to shift to the right an increase in demand
● Goods for which when quantity demanded increases as income rises are
known as normal goods
● Inferior goods on the other hand, are goods whose demand decreases as
income increases (public transit)
◆ Price of other goods
● Substitutes in consumption are referred to as products that can substitute
for a similar good once its price rises and consumers are no longer willing
to pay that much for it
● Complements in consumption are products that tend to come as a
package (shoes and laces, car and gasoline). In these cases, if the price of
one rises the price of the other good rises along with it
, Chapter 3&4 Notes
◆ Significant changes in weather
● In winter for example, there is a greater demand for electricity, natural gas,
and energy sources
● In the summer however, there is a greater demand for AC’s and dry spell
◆ Population
● An increase in the population with purchasing power can cause a greater
demand for all products purchased by the new people
◆ Consumer’s Taste
● A change in consumer taste can be caused be the evolution of technology
or fast fashion, or a change in weather
➔ Movements along the curve
◆ In the story of rising demand for coffee rises the prices of coffee and rising prices
of coffee decrease the demand for coffee
● The first part contains an outward shift for the curve graph as demand is
increasing
● The second part of the statement is talking about how the new shift in the
demand curve has caused the prices to move with it, therefore causing a
shift on the new demand curve
● Now possible explanation for this would be
○ Rise in population and income in coffee-drinking countries shifts
the demand curve for coffee to the right, which also leades to the
rise of prices of coffee
○ The rising price of coffee is causing many individual households to
cut back on their coffee purchases. The cutback is represented by
an upward movement to the left along the new demand curve
for coffee
◆ To make it easier a change in demand refers to a change in the
quantity-demanded at every price (a change in demand refers to a shift of the
entire demand curve)
◆ A change in the quantity demanded refers to a movement from one point on a
demand curve to another point, either on the same demand curve or a new one
3.2 Supply
➔ Quantity supplied refers to the amount of some good or service that a producer wants to
sell in some time period (because of the time dimension, Qs is a flow)
➔ Again, the quantity supplied is the amount that producers are willing to offer for sale, and
not how much they end up selling, that term is called quantity sold
➔ NOTE: any event that makes the production of a product more profitable will lead firms
to supply more of it, which can be influenced by,
◆ Products own price
◆ Price of inputs
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