1. versus Market demand curve: How many cans of beer would consumers purchase (the quantity demanded), if the price of beer were _____, given that everything else relevant to the demand for beer remains the same? Market supply curve: How many cans of beer would firms produce (the quantity supplied), if the price of beer were _____, given that everything else relevant to the supply of beer remains the same? Equilibrium: Quantity Demanded = Quantity Supplied Shifts  Change in something OTHER THAN the price of beer ITSELF Movements along a Curve  Change in the price of beer ITSELF The demand curve for beer can SHIFT ONLY if something that affects demand OTHER THAN the BEER PRICE changes. The supply curve for beer can SHIFT ONLY if something that affects supply OTHER THAN the BEER PRICE changes.  The slopes of the demand and supply curves for beer capture the effect of a change in the BEER PRICE itself; a change in the price of beer leads to a MOVEMENT ALONG the demand and supply curves for beer. P Q D S P* Q* Shortage Surplus Market Forces If Actual Price < Equilibrium PriceIf Actual Price > Equilibrium Price push the actual price to the equilibrium price. Market Applications – Review: Demand and Supply Curves

2. The U.S. Egg Industry – May-July 2015 First Week of Price of Large Eggs dollars per dozen Eggs Processed under Federal Inspection (millions of pounds) May1.051,460 June2.451,245 July1.901,360 Q P.50 1.00 1.50 2.00 1,2001,4001,3001,500 June May July S June S May S July First, the market supply curve May-June Shifts left June-July Shifts right Next, the market demand curve 2.50 3.00 D May-July May 12: The U.S. Department of Agriculture’s Animal and Plant Health Inspection Service said the presence of the illness on an egg farm in Dixon County in northeast Nebraska is the first in the state. May 21: Avian influenza has resulted in the deaths … of at least 38.9 million birds, … more than 32 million are egg- laying hens, accounting for about 10% of the U.S. egg-laying flock. June 15: Reports of new infections have dropped off since the start of June, with only one new case reported last week in Iowa, … USDA: The human-health risk of the viruses is considered low, and no human infections have been identified Question: Did the supply curve have to shift? Answer: Yes Question: Why did it shift? Question: Did the demand curve have to shift? Answer: No

3. The U.S. Egg Industry – May-July 2015 First Week of Price of Large Eggs dollars per dozen Eggs Processed under Federal Inspection (millions of pounds) May1.051,460 June2.451,245 July1.901,360 Q P.50 1.00 1.50 2.00 1,2001,4001,3001,500 June May July S June S May S July Reconsidering the market demand curve May-June Shifts left June-July Shifts right 2.50 3.00 D May USDA: The human-health risk of the viruses is considered low, and no human infections have been identified. Question: Suppose that consumers did not heed the USDA’s advice and feared the bird flu? D June D July

4. Project: Market for Personal Computers in the 1980's Personal ComputersCost of 16 BitNew PriceQuantityProcessorsOperatingWordNew Year($ per PC)(millions)($ per bit)SystemsProcessorsSpreadsheets 19821,7003.518WordStarMultiplan 1983WindowsWordLotus 1-2-3 19841,9007.512 1985Windows 1.0WordPerfect 19862,7007.018 1987Windows 2.0Excel 19882,9009.59 Between 1982 and 1984Between 1984 and 1986Between 1986 and 1988 Price rose by $200 Price rose by $800 Price rose by $200 Quantity rose by 4 million Quantity fell by.5 million Quantity rose by 2.5 million Question: How can we explain this erratic behavior?

5. Personal ComputersCost of 16 BitNew PriceQuantityProcessorsOperatingWordNew Year($ per PC)(millions)($ per bit)SystemsProcessorsSpreadsheets 19821,7003.518WordStarMultiplan 1983WindowsWordLotus 1-2-3 19841,9007.512 1985Windows 1.0WordPerfect 19862,7007.018 1987Windows 2.0Excel 19882,9009.59 Project: Market for Personal Computers in the 1980's Revisited 1,500 2,000 2,500 3456 P Q 1982 1984 1986 1988 78910 3,000 Demand Curve 1982-1984 Shifts right 1984-1986 Shifts right Supply Curve 1982-1984 Shifts right 1984-1986 Shifts left 1986-1988 Shifts right D 1982 D 1984 D 1986 D 1988 S 1988 S 1982,1986 S 1984 S 1982 1986-1988 Shifts right Question: Could you explain this one week ago?

6. Market demand curve: How many cans of beer would consumers purchase (the quantity demanded), if the price of beer were _____, given that everything else relevant to the demand for beer remains the same? Market supply curve: How many cans of beer would firms produce (the quantity supplied), if the price of beer were _____, given that everything else relevant to the supply of beer remains the same? Equilibrium: Quantity Demanded = Quantity Supplied P Q D S P* Q* Shortage Surplus Market Forces If Actual Price < Equilibrium PriceIf Actual Price > Equilibrium Price  Market forces push the actual price up to the equilibrium price. Review: Market Forces – Actual Price and the Equilibrium Price  Market forces push the actual price down to the equilibrium price. Question: What happens if the government imposes a price ceiling or a price floor that restricts market forces? Two examples:Price Ceiling  Rent Control Price Floor  Minimum Wage

7. Rent Control in New York City What are the appropriate units for apartment space? Why is the demand curve downward sloping? Why is the supply curve upward sloping? At the equilibrium, can all those who choose to rent apartment space do so? P Q(sq ft) ($/sq ft) P* S D Pre-WWII Market for Apartment Space in New York City During World War II –Influx of workers from all over the country Immediately After World War II – Returning soldiers Present Time Question: What is the goal of rent control today? Question: Who is helped by rent control? Question: Who is not helped by rent control? Question: Is the current goal being achieved? Question: What would have happened had rent control not been enacted? Question: What was the goal of rent control then? Long Run Impact: What will happen in the market for apartment space? Question: What was the goal of rent control then? D P** P RC = P* Question: What were the consequences? Shortage S Help low income households. All those, both poor and rich, who are lucky enough to find a rent control apartment. All those, both poor and rich, who are not lucky enough to find a rent control apartment. Landlords.  Video  Video

8. 3.Rent control (a ceiling on rents) reduces the quantity and quality of rental housing available. Generally AgreeGenerally Disagree Economists92.9%6.5%