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Economics Lecture Three (view source)
Revision as of 21:32, September 15, 2009
, 21:32, September 15, 2009better
Building on last week's class, we can now state the three most basic principles of economics with respect to price:
Building on last week's class, we can now state the three most basic principles of economics with respect to price:
*A fall in price tends to increase demand, and a rise in price tends to decrease demand. '''LOWER PRICE MEANS HIGHER DEMAND''' (and higher price means lower demand). This is known as the '''Law of Demand''': demand changes inversely with price.
*A fall in price tends to increase demand, and a rise in price tends to decrease the demand. '''LOWER PRICE MEANS HIGHER DEMAND''' (and higher price means lower demand). This is known as the '''Law of Demand''': the demand changes inversely with price.
*When demand exceeds supply at a given price, the price tends to rise as sellers take advantage of the high demand by increasing price. Similarly, when supply exceeds demand, the price tends to decrease as sellers try to sell their unsold goods.
*When demand exceeds supply at a given price, the price tends to rise as sellers take advantage of the high demand by increasing price. Similarly, when the supply exceeds the demand, the price tends to decrease as sellers try to sell their unsold goods.
*Price tends to move towards the amount at which the quantity in demand is equal to the quantity in supply: '''EQUILIBRIUM IS WHERE SUPPLY EQUALS DEMAND'''.
*Price tends to move towards the amount at which the quantity in demand is equal to the quantity in supply: '''EQUILIBRIUM IS WHERE SUPPLY EQUALS DEMAND'''.
Many of the problems in this course, and in any economics course, can be answered just by remembering and applying the above three principles about price. The equilibrium price is the result of a "tug of war" between the buyers and sellers: the buyers (the public) want to pay less (a lower price), and the sellers want to receive more (a higher price). These opposing forces are constantly working to keep the price at equilibrium.
Many of the problems in this course, and in any economics course, can be answered just by remembering and applying the above three principles. The equilibrium price is the result of a "tug of war" between the buyers and sellers: the buyers (the public) want to pay less (a lower price), and the sellers want to receive more (a higher price). These opposing forces are constantly working to keep the price at equilibrium.
== The Law of Supply ==
== The Law of Supply ==
12. Describe and discuss how wealth is created in society.
12. Describe and discuss how wealth is created in society.
[[Category:Economics lectures]]
[[Category:Economics lectures]]
{{DEFAULTSORT: Economics Lecture 03}}
{{DEFAULTSORT: Economics Lecture 03}}