Class Twenty Seven

Economics lecture summary

1. How does the burrito market graph?

When ask each individual how many burritos would he buy at a variable price, and add this information, then form the graph of the world burrito market graph.

2. Notice

(1) the shape of the market. (Demand vs Individual)

The global burrito market graph is flatter than the US burrito market graph.

(2) Can we aggregate further?

If one person buy 100 lap tops if the price is $3 each and 3 burritos when the price is $3 too, in the one graph of the market of him, he buy 103 “things” when the price is $3.

3. In the individual graph, P means the trade-off.

4. Quantity Demand: it has only to do with the number of the goods you purchase when price changes

There is no change how you respond to the price.

     Demand: The entire relationship between the price and the quantity of the goods.

5. What change your consumption?

        (Take orange as an example)

     (1) Own price of the goods itself

        When price of an orange goes up, people buy fewer. The point moves along the demand curves.

     (2) Everything else (a kind of pressure)

·      Wage, Income

·      Substitute

These two factors affect people’s ability of purchasing.

·      Taste

·      Expectation

·      # of participants

These three factors affect people’s willingness of purchasing

When the price of the orange remains the same, but something out of the price make us want more, we purchase more. Then the demand shift out.(right means you purchase more, left means you purchase less)

6. There are two kinds of goods

(1) Normal goods: When the income goes up, Q(quantity demand) goes up.(or we can say the demand shift right)

(2) Inferior goods: when you have more money, Q goes down because you buy something inferior, which is better then that, to substitute, so Q goes down. (or we can say the demand shift left)

*we define the two kinds of goods based on how we respond and how we behavior. A may think that orange is inferior then apple, but B may think that apple is inferior than orange. So it is SUBJECTIVE!!

7. “Prices”(not money) of other good

(1) Substitutes: we can find something that can replace the previous goods with the same service. For example, when the price of pizza goes up, we may buy more burrito to take place of it.

(2) Complements (go together)

coffee & sugar

when the price of sugar goes up, we buy less coffee.

*there is no natural complements but it depends on how people behave.