This microeconomics lecture covers the hallmark framework of the field: the supply and demand model.
Welcome to your second module in Microeconomics Principles! This module we will cover the hallmark framework of the field: the supply and demand model. I am sure that if you knew any economics words before enrolling in this course those two words were supply and demand. This module you will finally learn what all the fuss is about.
By the end of this module, you will see that the beauty of the supply and demand model is that it is both simple and powerful. Nonetheless, it takes a little bit of work to develop it. And you want to make sure you understand it well because we will be using it quite a bit during the course. So we’ll build it step by step, first focusing on deriving the demand curve and then moving on to the supply curve. Finally, after explaining the idea of market equilibrium, I will show you how to use the model to make predictions about market changes.
2 Goals and Objectives
After you actively engage in the learning experiences in this module, you should be able to:
- Identify what a market is.
- Identify the determinants of demand and supply for a good and service.
- Forecast what happens to equilibrium price and quantity as a result of a change in the market conditions.
3 Key Phrases/Concepts
Keep your eyes open for the following key terms or phrases as you complete the readings and interact with the lectures. These topics will help you better understand the content in this module.
- Supply shortage
- Supply surplus
- Difference between a change in quantity demanded/supplied and a change in demand/supply
4 Guiding Questions
Develop your answers to the following guiding questions while completing the readings and working through the module.
- What is the difference between a change in quantity demanded and a change in demand?
- What determinants of demand (supply) cause the demand (supply) curve to shift?
- What happens to the market price when there is a supply shortage (surplus)?
5 Readings & Resources
- Chapter 3, Microeconomics, Krugman and Wells, 3rd ed.
6 Lecture videos
6.1.1 What is a Market? (00:01:39)
6.1.2 The Market for Romantic Relationships (00:07:46)
6.2.1 The Determinants of Demand (00:04:00)
6.2.2 The Demand Function, Schedule, and Curve (00:07:24)
6.2.3 Introducing Comparative Statistics: Changes in the Price (00:04:51)
6.2.4 A Change in Demand, Part 1 (00:13:30)
6.2.5 A Change in Demand, Part 2 (00:10:28)
6.3.1 The Determinants of Supply (00:04:46)
6.3.2 The Supply Equation, Schedule, and Curve (00:07:09)
6.3.3 Price of an Input Changes (00:05:54)
6.3.4 A Change in Technology (00:04:39)
6.4.1 Supply Surplus, Supply Shortage, and Equilibrium Price (00:12:28)
6.5 Using The Model of Supply And Demand
6.5.1 Changes in Demand: Price of Related Goods (00:10:01)
6.5.2 Changes in Demand: Consumer Preferences (00:04:28)
6.5.3 A Change in Supply (00:07:43)
6.5.4 Simultaneous Change in Supply and Demand (00:06:31)
6.4.1 Demand and Supply Conclusion (00:08:15)