Post on 10-Dec-2014
description
transcript
54321
P QD
1020355580
A schedule or a curve that shows the various amounts of a product that consumers are willing and able to purchase at each of a series of possible prices.
What is Demand?
Buyers determine demand
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Price of quantity
Quantity
Plot the Points
10 20 30 40 50 60 70 80
Graphing Demand
55 Qo
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P QD
54321
1020355580
Quantity
Plot the Points
10 20 30 40 50 60 70 80
Price of quantity
Graphing Demand P
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Qo
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54321
1020355580
Quantity
Plot the Points
10 20 30 40 50 60 70 80
Price of quantity
Graphing Demand
P
Qo
5
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P QD
54321
1020355580
Price of quantity
Quantity
Plot the Points
10 20 30 40 50 60 70 80
Price of quantity Graphing Demand
P
Qo
5
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P QD
54321
1020355580
Price of quantity
Quantity
Plot the Points
10 20 30 40 50 60 70 80
Graphing Demand
P
Qo
5
4
3
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P QD
54321
1020355580
D
Price of quantity
Quantity
Connect the Points
10 20 30 40 50 60 70 80
Graphing Demand
• As Price Falls…
…Quantity Demanded Rises
• As Price Rises…
…Quantity Demanded Falls
An inverse relationship exists between price and quantity demanded
Law of Demand
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Qo
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Quantity
10 20 30 40 50 60 70 80
Price of quantity
Graphing Demand
What if
Demand
Increases?
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Qo
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54321
D
Price of quantity
Quantity
10 20 30 40 50 60 70 80
D’
Increase
in
Demand
Increase
In quantity
demanded
(extension in demand)10
20355580
30406080 +
Graphing Demand
P2
P1
P
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54321
1020355580
D
Price of qauntity
Quantity
10 20 30 40 50 60 70 80
What if
Demand
Decreases?
Graphing Demand
P
Qo
5
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P QD
54321
1020355580
D
Price of quantity
Quantity
10 20 30 40 50 60 70 80
-- 10204060
D’
Decrease
in
Demand
Decrease in quantity
demanded
(contraction in demand)
Graphing Demand
P1
P2
• Product’s own price• Income of Buyers• Prices of Related Goods• Tastes• Expectations• Number of Buyers
Determinants of demand
Determinants of demand
VARIABLE A CHANGE IN THIS VARIABLE
PRICE Representation a movement along the demand curve
INCOME Shift the demand curve
TASTES Shift the demand curve
PRICE OF OTHER GOODS Shift the demand curve
NUMBER OF BUYERS Shift the demand curve
EXPECTATION Shifts the demand curve
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P QS
Supply is a schedule or a curve showing the amounts of a product that producers are willing and able to make available for sale at each of a series of possible prices.
Supply is a schedule or a curve showing the amounts of a product that producers are willing and able to make available for sale at each of a series of possible prices.
520355060
What is Supply?
5
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Qo
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10 20 30 40 50 60 70 80
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P QS
Price of a quantity
Quantity
Plot the Points
Graphing Supply?
P
Qo
5
4
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1
10 20 30 40 50 60 70 80
54321
60503520 5
P QS
Quantity
Price of a quantity
Graphing Supply?
35
P
Qo
5
4
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1
10 20 30 40 50 60 70 80
54321
60503520 5
P QS
Quantity
Price of a quantity
Graphing Supply?
P
Qo
5
4
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2
1
10 20 30 40 50 60 70 80
54321
60503520 5
P QS
Quantity
Price of a quantity
Graphing Supply?
P
Qo
5
4
3
2
1
10 20 30 40 50 60 70 80
54321
60503520 5
P QS
Quantity
Price of a quantity
Graphing Supply?
SP
Qo
5
4
3
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1
10 20 30 40 50 60 70 80
54321
60503520 5
P QS
Quantity
Connect the Points
Price of a quantity
Graphing Supply?
• As Price Rises…
…Quantity Supplied Rises
• As Price Falls…
…Quantity Supplied Falls
A direct relationship exists between price and quantity supplied
Law of Supply?
Price of quantity
SP
Qo
5
4
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1
10 20 30 40 50 60 70 80
$54321
60503520 5
P QS
Quantity
What if
Supply
Increases?
Law of Supply?
SP
Qo
5
4
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1
10 20 30 40 50 60 70 80
Price of quantity
Quantity
54321
60503520 5
P QS
8070604530
S’Increase
in
Supply
Increase
in Quantity
Supplied
Law of Supply?
P1
P2
SP
Qo
5
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10 20 30 40 50 60 70 80
$54321
60503520 5
P QS
Quantity
What if
Supply
Decreases?
Price of a quantity
Law of Supply?
SP
Qo
5
4
3
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1
10 20 30 40 50 60 70 80
54321
60503520 5
P QS
Quantity
S’
453020 0 --
Decrease
in
Supply
Decrease
in Quantity
Supplied
Price of a quantity
Law of Supply?
P2
P1
• Prices of the good / service
• Technology
• Taxes & Subsidies
• Prices of Other Goods
• Number of Sellers
Determinants of Supply?
Determinants of Supply?
VARIABLE A CHANGE IN THIS VARIABLE
PRICE Representation a movement along the supply curve
TECHNOLOGY Shift the supply curve
TASTES & SUBSIDIES Shift the supply curve
PRICE OF OTHER GOODS Shift the supply curve
NUMBER OF SELLERS Shift the supply curve
EXPECTATION Shifts the supply curve
EQUILIBRIUMEQUILIBRIUM
Equilibrium refers to a situation in which the price has reached the level where quantity supplied equals quantity demanded. quantity supplied = quantity demanded
(qs = qd)
54321
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200
B
U
Y
E
R
S
P QD
MARKET
DEMAND
2,0004,0007,000
11,00016,000
200
S
E
L
L
E
R
S
12,00010,000
7,0004,0001,000
P QS
MARKET
SUPPLY
EQUILIBRIUM
x x
EQUILIBRIUMEQUILIBRIUM
7
S
Qo
5
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P QD
54321
2,0004,0007,000
11,00016,000
54321
12,00010,000
7,0004,0001,000
D
P QS
Quantity
EQUILIBRIUM
EQUILIBRIUM
Surplus
When price > equilibrium price, then quantity supplied > quantity demanded.
•There is excess supply or a surplus. •Suppliers will lower the price to increase sales, thereby moving toward equilibrium.
Shortage
When price < equilibrium price, then quantity demanded > the quantity supplied.
•There is excess demand or a shortage. •Suppliers will raise the price due to too many buyers chasing too few goods, thereby moving toward equilibrium.
EQUILIBRIUMEQUILIBRIUM
7
SP
Qo
5
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2 4 6 8 10 12 14 16
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54321
2,0004,0007,000
11,00016,000
54321
12,00010,000
7,0004,0001,000
D
P QS
Price of quantity
Quantity
SurplusAt a “P4” price
more is being
supplied than
demanded
EQUILIBRIUM- surplusEQUILIBRIUM- surplus
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SP
Qo
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2 4 6 8 10 12 14 16
P QD
54321
2,0004,0007,000
11,00016,000
54321
12,00010,000
7,0004,0001,000
D
P QS
Price of quantity
Quantity
At a “P2” price
more is being
demanded than
supplied
Shortage
EQUILIBRIUM- shortageEQUILIBRIUM- shortage
QUESTIONSQUESTIONS
?
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