Download Supply and Demand

SUPPLY AND DEMAND
I. Introduction
A. Three steps
1. Formulate theory of demand
2. Formulate theory of supply
3. Integrate theories of supply and demand using concept of equilibrium
II. Theory of demand
A. Purpose
B. Dependent variable
1. Quantity demanded
C. Explanatory variables
1. Price
a. Law of demand
b. Rationale for law of demand
1. Substitution effect
2. Income effect
c. Formal expression of law of demand
1. Demand schedule
2. Demand curve
3. Demand function
d. Quantity demanded and demand
D. Non-price explanatory variables (demand shift factors)
1. Income
a. Hypothesis
b. Normal goods
c. Inferior goods
2. Distribution of income
a. Hypothesis
b. Luxury goods
c. Staple goods
3. Prices of related goods in consumption
a. Hypothesis
b. Substitutes in consumption
c. Complements in consumption
4. Number of buyers in market
a. Hypothesis
5. Consumer tastes and preferences
6. Consumer expectations
IV. Theory of supply
A. Purpose
B. Dependent variable
1. Quantity supplied
C. Explanatory variables
1. Price
a. Law of supply
b. Rationale for law of supply
1. Profit motive
c. Formal expression of law of supply
1. Supply schedule
2. Supply curve
3. Supply function
d. Quantity supplied and supply
D. Non-price explanatory variables (supply shift factors)
1. Cost variables
a. Input prices
1. Hypothesis
b. Technology
1. Hypothesis
c. Taxes and subsidies
1. Hypothesis
2. Non-cost variables
a. Prices of related goods in production
1. Hypothesis
2. Substitutes in production
3. Complements in production
b. Number of sellers in the market
1. Hypothesis
C. Producer expectations
1. Hypothesis
III. Supply and demand analysis
A. How price is determined in a competitive market
1. Shortage
2. Surplus
3. Equilibrium
B. Using supply and demand analysis to explain and predict
1. Comparative static analysis
a. Five steps in comparative static analysis
2. Dynamic analysis