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 5.