Econ 3332
8/23/2022
Lecture 1
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We refer to markets using time and concept.
Model Assumptions
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 We focus on supply and demand in a single market.
 All goods or services sold in the market are identical.
All goods or services sold in the market sell for the same price
 Everyone has the same information
 There are many producers and consumers in the market
Demand


Demand is a function that maps prices to the quantity demanded. The demand function
(demand curve) shifts with changes in the following factors
1. Number of consumers
2. Consumer income or wealth
3. Consumer tastes
4. Prices of related goods or services (complements and substitutes)
The Demand Choke Price is the price at which consumer demand drops to 0 because
the price is too high.

Supply
Supply is a function thar maps prices to the quantity supplied. The supply function
(supply curve) shifts with changes in the following factors.
1. Production costs
2. Number of sellers
3. Sellers outside options
o The Supply Choke Point is the point at which price is so low that no producers are
willing to sell.
o Change in Supply: a shift of the entire supply curve caused by a change in a non-price
factor that affects supply.
Market Equilibrium
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
A market is in equilibrium when quantities supplied and demanded are equal.