Lecture Notes for 09/07/2012

Chalkboard notes.

Last time we introduced the notion of a market very briefly as a segue from our historical analysis of other economic systems. Why are we concerned with markets? Under the capitalist form of the social provisioning process, markets serve as the primary institutions by which we organize production and distribution. So, we need to define in careful terms what it is that we mean by “the market.”

The Demand Curve

Here's one that just deals with the demand curve. We will discuss the factors that cause these curves to shift on Monday. But, if you take a few minutes now to interact with the model you will develop your own intuition, which should help these concepts really stick.

Shifts in the Demand Curve from the Wolfram Demonstrations Project by Sarah Lichtblau

Basic Supply and Demand Model

Here is an interactive version of the supply and demand model we dealt with in class today. Play around with the sliders. Adjusting the supply or demand intercept sliders will shift those curves. Adjusting the slope sliders will change the elasticities of the curves. A steeper slope implies that the curves are inelastic, whereas a shallow or flatter slope implies a high degree of elasticity. Remember, we are not spending too much time dealing with the concept of elasticity in the course - all you need to remember is that when curves are inelastic (steep), it takes relatively large price changes to induce a change in quantity, whether it be supplied or demanded. Take some time to play around with the sliders, making sure to observe how different combinations might effect the relationship between price and quantity in the model. If you have questions write them down and bring them to class so we can discuss them. Note: you may need to download a plugin for this to work in you browser. The plugin can be found here.

Basic Supply and Demand from the Wolfram Demonstrations Project by Mark Gillis