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4.7 Markets
4.7.1 Market Forces4.7.2 Shifts in Demand4.7.3 Shifts in Supply4.7.4 Some Examples4.7.5 Summary
Application
“Growers scalded by the weak price of tea” Alan Hamilton, The Times, 25th July 2007
•UK consumers paying far less for tea than we did 30 years ago
•Price is less than 1p a cup and the real price is a quarter of what it was in 1977
•Production stands at 3.5 million tonnes from 36 countries
•UK demand starting to rise at specialist end but static for standard tea; global supply is 2% too great each year.
4.7.1 Market Forces
Market Demand - aggregation of individual demands
Market Supply - aggregation of all MC curves for firms
P
Q
S = MC
D = d
Pe
QeQd Qs
P1Equilibrium
4.7.2 Shifts in Supply
Change in input pricesLeft Right
Cost of technology
Government Intervention:
Subsidies
Taxes
Down
Up
4.7.3 Shifts in Demand
Change in incomeLeft Right
Change in price of substitutes
Change in price of complements
Change in income (inferior good)