Example: Transportation Prices – vary with crowds or not? Economics 001 - NYC Subway Principles of Microeconomics

Professor Arik Levinson - Airlines

•Lecture 2 - DC Taxis –Demand –Supply - DC Metro

- DC Beltway Toll Lanes

- Uber

Would you be willing to purchase Definition: Quantity Demanded the following package?

Textbook plus i>Clicker plus APLIA

QD = the amount of a good or service people reasonable desire to purchase (can afford) during a particular time at a particular price.

The Demand Curve The "Law" of demand

Other things equal, the Price (P) P higher the price of a D good, the smaller the D QD quantity demanded (Q ) D

(Latin: Ceteris paribus ... "other things equal") Quantity (QD)

1 Shifts in D curve Shifts in the Demand Curve

• income • price of substitutes Price (P) • price of complements • population, tastes, weather • expected future prices D • quality of the product

Quantity (QD)

2 common confusions Definition: Quantity Supplied

#1) Individual vs. Market demand QS = the amount of a good or service suppliers will be willing and able to sell #2) Movement along vs. shift in D curve during a particular time at a particular price, ceteris paribus.

Would you be willing to sell your i>Clicker to the Economics Department at the end of the semester? i>Clicker

2 The Supply Curve The "Law" of supply

The higher the price Price (P) P S of a good, the more S producers will be

QS willing to supply (QS), ceteris paribus

Quantity (QS)

Shifts in S curve Shifts in the Supply Curve

• price of inputs • P of other goods produced Price (P) S • expected future prices • # suppliers • technology

Quantity (QS)

Put Supply and Demand together What if the price is too high?

Price (P) S Price (P) P S

D

D QD QS Q

Quantity (Q) Surplus

3 Market equilibrium What if the price is too low?

Price (P) S Price (P) S

P* P D D

Q* Q QS QD Q QS=QD Shortage

Market equilibrium DN: Market equilibrium

Price (P) S A Price and quantity at which there is no shortage or surplus P* QS = QD D

Q* Q QS=QD

Shifts in Supply and Demand can The Four “Laws” of Demand and Supply now be related to P and Q

Shift P* Q*

S  S  D  D 

4 Disney’s reasons for switching from ticket books to entry pass: Examples • Customers prefer it. • Lower administrative costs. • Eliminate aftermarket in tickets. • Illegal drugs • Charge parents who don’t go on rides. • Kidneys • Eliminate loiterers. • Sell more food and drink. •Algebra •….. • Rent control -- a price ceiling • The minimum wage -- a price floor

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