The document discusses microeconomics and the interaction of demand and supply in determining prices. It provides information on demand schedules, the law of demand, substitution and income effects, ceteris paribus, factors that can shift demand, normal and inferior goods, substitutes, complements, and the difference between a change in demand versus a change in quantity demanded. Quizzes are included that ask about the inventor of containerization and examples of substitutes and complements.

1. Microeconomics
Chapter 3
Where Prices Come From:
The Interaction of
Demand and Supply

2. It’s not what you are,
but what you don’t
become that hurts.
-Oscar Levant

3. Quiz 2
1. Who invented containerization?
2. Name two substitutes.
3. Name two compliments.

4. Quiz 2
1. Who invented containerization?
Malcolm McClean
2. Name two substitutes.
Tacos OR Hamburgers
3. Name two compliments.
Buns AND Hot Dogs

5. Demand
Schedule
Price Quantity $100
$90 1 $90
$80
$80 2
$70
$70 3
$60
$60 4 $50
$50 5 $40
$40 6 $30
$20
$30 7
$10
$20 8
$0
$10 9 0 1 2 3 4 5 6 7 8 9 10

6. Law of Demand
When price falls
quantity demand increases
When price increases
quantity demanded falls.

7. Substitution Effect
The good is more or less
expensive relative to other
goods that are substitutes.

8. Income Effect
The effect of a price change
on consumer’s purchasing
power.

9. Ceteris Paribus
“all else equal”

10. Shift Demand
Income
Prices of Related Goods
Tastes
Population & Demographics
Expected Future Prices

11. Normal Good
Demand increases
as income rises and
decreases as income falls

12. Inferior Good
Demand decreases
as income rises and
increases as income falls

14. Substitutes
Goods or services
that can be used
for the same purpose

16. Compliments
Goods or services
that are
used together

18. Change in Demand
vs.
Change in
Quantity Demanded