1、R. GLENNHUBBARDANTHONY PATRICKOBRIENFIFTH EDITION 2015 Pearson Education, Inc.2 2015 Pearson Education, Inc.Chapter Outline andLearning Objectives3.1 The Demand Side of the Market3.2 The Supply Side of the Market3.3 Market Equilibrium: Putting Demand and Supply Together3.4 The Effect of Demand and S
2、upply Shifts on EquilibriumCHAPTER3 Where Prices Come From:The Interaction of Demand and Supply3 2015 Pearson Education, Inc.What Determines the Price of a Smartphone?Demand for smartphones How many smartphones do consumers want to buy? Affected by price of the smartphones Affected by other factors,
3、 including prices of other goodsSupply of smartphones How many smartphones are producers willing to sell? Affected by price of the smartphones Affected by other factors, including prices of other goodsWe will analyze these in a perfectly competitive market: a market with (1) many buyers and sellers,
4、 (2) all firms selling identical products, and (3) no barriers to new firms entering the market.LEARNING OBJECTIVE4 2015 Pearson Education, Inc.The Demand Side of the Market3.1Discuss the variables that influence demand.5 2015 Pearson Education, Inc.Demand Schedules and Quantity DemandedDemand sched
5、ule: A table that shows the relationship between the price of a product and the quantity of the product demanded.Quantity demanded: The amount of a good or service that a consumer is willing and able to purchase at a given price.A demand schedule and a demand curveFigure 3.16 2015 Pearson Education,
6、 Inc.Demand Curve and Market DemandDemand curve: A curve that shows the relationship between the price of a product and the quantity of the product demanded.Market demand: the demand by all the consumers of a given good or service.A demand schedule and a demand curveFigure 3.17 2015 Pearson Educatio
7、n, Inc.Ceteris ParibusWhen drawing the demand curve, we assume ceteris paribus.Ceteris paribus (“all else equal”) condition: The requirement that when analyzing the relationship between two variablessuch as price and quantity demandedother variables must be held constant.A demand schedule and a dema
8、nd curveFigure 3.18 2015 Pearson Education, Inc.The Law of DemandLaw of demand: The rule that, holding everything else constant, when the price of a product falls, the quantity demanded of the product will increase, and when the price of a product rises, the quantity demanded of the product will dec
9、rease.Implication: Demand curve slopes downwardA demand schedule and a demand curveFigure 3.19 2015 Pearson Education, Inc.What Explains the Law of Demand?When the price of a product falls, two effects cause consumers to purchase more of it: The product has become cheaper relative to other goods, so
10、 consumers substitute toward it. This is the substitution effect. The consumer now has greater purchasing power, and elects to purchase more goods overall. This is income effect.Substitution effect: The change in the quantity demanded of a good that results from a change in price making the good mor
11、e or less expensive relative to other goods that are substitutes.Income effect: The change in the quantity demanded of a good that results from the effect of a change in the goods price on consumers purchasing power.10 2015 Pearson Education, Inc.Increase and Decrease in DemandA change in something other than price that affects demand causes the entire demand curve to shift.A shift to the right (D1 to D2) is an increase in demand.A shift to the left (D1 to D3) is a decrease in demand.Shifting the demand curveFigure 3.2
