Markets

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Markets

  1. 1. 3 - 1Copyright McGraw-Hill/Irwin, 2002MarketsDemand DefinedDemand GraphedChanges in DemandSupply DefinedSupply GraphedChanges in SupplyEquilibriumSurplusesShortagesKey TermsPreviousSlideNextSlideEndShowIndividualMarketsDemand & Supply3C H A P T E R
  2. 2. 3 - 2Copyright McGraw-Hill/Irwin, 2002MarketsDemand DefinedDemand GraphedChanges in DemandSupply DefinedSupply GraphedChanges in SupplyEquilibriumSurplusesShortagesKey TermsPreviousSlideNextSlideEndShowMARKETS DEFINEDMARKETSPOTENTIALSELLERSPOTENTIALBUYERS
  3. 3. 3 - 3Copyright McGraw-Hill/Irwin, 2002MarketsDemand DefinedDemand GraphedChanges in DemandSupply DefinedSupply GraphedChanges in SupplyEquilibriumSurplusesShortagesKey TermsPreviousSlideNextSlideEndShow$54321DEMAND DEFINEDDEMAND SCHEDULEVarious AmountsA Series of Possible Prices…a specified time period…other things being equalP QD1020355580
  4. 4. 3 - 4Copyright McGraw-Hill/Irwin, 2002MarketsDemand DefinedDemand GraphedChanges in DemandSupply DefinedSupply GraphedChanges in SupplyEquilibriumSurplusesShortagesKey TermsPreviousSlideNextSlideEndShowLAW OF DEMAND• As Price Falls……Quantity Demanded Rises• As Price Rises……Quantity Demanded FallsAn inverse relationship existsbetween price and quantitydemanded
  5. 5. 3 - 5Copyright McGraw-Hill/Irwin, 2002MarketsDemand DefinedDemand GraphedChanges in DemandSupply DefinedSupply GraphedChanges in SupplyEquilibriumSurplusesShortagesKey TermsPreviousSlideNextSlideEndShow• Diminishing Marginal UtilityLAW OF DEMAND
  6. 6. 3 - 6Copyright McGraw-Hill/Irwin, 2002MarketsDemand DefinedDemand GraphedChanges in DemandSupply DefinedSupply GraphedChanges in SupplyEquilibriumSurplusesShortagesKey TermsPreviousSlideNextSlideEndShow• Diminishing Marginal UtilityLAW OF DEMAND• Income Effect
  7. 7. 3 - 7Copyright McGraw-Hill/Irwin, 2002MarketsDemand DefinedDemand GraphedChanges in DemandSupply DefinedSupply GraphedChanges in SupplyEquilibriumSurplusesShortagesKey TermsPreviousSlideNextSlideEndShow• Diminishing Marginal UtilityLAW OF DEMAND• Income Effect• Substitution Effect
  8. 8. 3 - 8Copyright McGraw-Hill/Irwin, 2002MarketsDemand DefinedDemand GraphedChanges in DemandSupply DefinedSupply GraphedChanges in SupplyEquilibriumSurplusesShortagesKey TermsPreviousSlideNextSlideEndShow• Diminishing Marginal Utility• Income Effect• Substitution EffectLAW OF DEMAND• Demand Curve• Individual and MarketDemand
  9. 9. 3 - 9Copyright McGraw-Hill/Irwin, 2002MarketsDemand DefinedDemand GraphedChanges in DemandSupply DefinedSupply GraphedChanges in SupplyEquilibriumSurplusesShortagesKey TermsPreviousSlideNextSlideEndShowDETERMINANTS OFDEMAND• Tastes and Preferences• Number of Buyers• Incomes– Normal (Superior) & Inferior Goods• Prices of Related Goods– Substitutes & Complements– Unrelated Goods• Expectations
  10. 10. 3 - 10Copyright McGraw-Hill/Irwin, 2002MarketsDemand DefinedDemand GraphedChanges in DemandSupply DefinedSupply GraphedChanges in SupplyEquilibriumSurplusesShortagesKey TermsPreviousSlideNextSlideEndShowGRAPHING DEMANDPQo$54321P QD$543211020355580Price of CornQuantity of CornCORNPlot the Points10 20 30 40 50 60 70 80
  11. 11. 3 - 11Copyright McGraw-Hill/Irwin, 2002MarketsDemand DefinedDemand GraphedChanges in DemandSupply DefinedSupply GraphedChanges in SupplyEquilibriumSurplusesShortagesKey TermsPreviousSlideNextSlideEndShow55PQo$54321P QD$543211020355580Price of CornQuantity of CornCORNPlot the Points10 20 30 40 50 60 70 80GRAPHING DEMAND
  12. 12. 3 - 12Copyright McGraw-Hill/Irwin, 2002MarketsDemand DefinedDemand GraphedChanges in DemandSupply DefinedSupply GraphedChanges in SupplyEquilibriumSurplusesShortagesKey TermsPreviousSlideNextSlideEndShow35PQo$54321P QD$543211020355580Price of CornQuantity of CornCORNPlot the Points10 20 30 40 50 60 70 80GRAPHING DEMAND
  13. 13. 3 - 13Copyright McGraw-Hill/Irwin, 2002MarketsDemand DefinedDemand GraphedChanges in DemandSupply DefinedSupply GraphedChanges in SupplyEquilibriumSurplusesShortagesKey TermsPreviousSlideNextSlideEndShowPQo$54321P QD$543211020355580Price of CornQuantity of CornCORNPlot the Points10 20 30 40 50 60 70 80GRAPHING DEMAND
  14. 14. 3 - 14Copyright McGraw-Hill/Irwin, 2002MarketsDemand DefinedDemand GraphedChanges in DemandSupply DefinedSupply GraphedChanges in SupplyEquilibriumSurplusesShortagesKey TermsPreviousSlideNextSlideEndShowPQo$54321P QD$543211020355580Price of CornQuantity of CornCORNPlot the Points10 20 30 40 50 60 70 80GRAPHING DEMAND
  15. 15. 3 - 15Copyright McGraw-Hill/Irwin, 2002MarketsDemand DefinedDemand GraphedChanges in DemandSupply DefinedSupply GraphedChanges in SupplyEquilibriumSurplusesShortagesKey TermsPreviousSlideNextSlideEndShowPQo$54321P QD$543211020355580DPrice of CornQuantity of CornCORNConnect the Points10 20 30 40 50 60 70 80GRAPHING DEMAND
  16. 16. 3 - 16Copyright McGraw-Hill/Irwin, 2002MarketsDemand DefinedDemand GraphedChanges in DemandSupply DefinedSupply GraphedChanges in SupplyEquilibriumSurplusesShortagesKey TermsPreviousSlideNextSlideEndShowPQo$54321P QD$543211020355580DPrice of CornQuantity of CornCORN10 20 30 40 50 60 70 80What ifDemandIncreases?GRAPHING DEMAND
  17. 17. 3 - 17Copyright McGraw-Hill/Irwin, 2002MarketsDemand DefinedDemand GraphedChanges in DemandSupply DefinedSupply GraphedChanges in SupplyEquilibriumSurplusesShortagesKey TermsPreviousSlideNextSlideEndShowPQo$54321P QD$54321DPrice of CornQuantity of CornCORN10 20 30 40 50 60 70 80D’IncreaseinDemandIncreasein QuantityDemanded102035558030406080+GRAPHING DEMAND
  18. 18. 3 - 18Copyright McGraw-Hill/Irwin, 2002MarketsDemand DefinedDemand GraphedChanges in DemandSupply DefinedSupply GraphedChanges in SupplyEquilibriumSurplusesShortagesKey TermsPreviousSlideNextSlideEndShowPQo$54321P QD$543211020355580DPrice of CornQuantity of CornCORN10 20 30 40 50 60 70 80What ifDemandDecreases?GRAPHING DEMAND
  19. 19. 3 - 19Copyright McGraw-Hill/Irwin, 2002MarketsDemand DefinedDemand GraphedChanges in DemandSupply DefinedSupply GraphedChanges in SupplyEquilibriumSurplusesShortagesKey TermsPreviousSlideNextSlideEndShowPQo$54321P QD$543211020355580DPrice of CornQuantity of CornCORN10 20 30 40 50 60 70 80--10204060D’DecreaseinDemandDecreasein QuantityDemandedGRAPHING DEMAND
  20. 20. 3 - 20Copyright McGraw-Hill/Irwin, 2002MarketsDemand DefinedDemand GraphedChanges in DemandSupply DefinedSupply GraphedChanges in SupplyEquilibriumSurplusesShortagesKey TermsPreviousSlideNextSlideEndShowSUPPLY DEFINEDSUPPLY SCHEDULE$12345P QSCORNVarious Amounts520355060
  21. 21. 3 - 21Copyright McGraw-Hill/Irwin, 2002MarketsDemand DefinedDemand GraphedChanges in DemandSupply DefinedSupply GraphedChanges in SupplyEquilibriumSurplusesShortagesKey TermsPreviousSlideNextSlideEndShowSUPPLY DEFINEDSUPPLY SCHEDULE$12345P QSCORNVarious AmountsA Series of Possible Prices…a specified time period…other things being equal520355060
  22. 22. 3 - 22Copyright McGraw-Hill/Irwin, 2002MarketsDemand DefinedDemand GraphedChanges in DemandSupply DefinedSupply GraphedChanges in SupplyEquilibriumSurplusesShortagesKey TermsPreviousSlideNextSlideEndShowLAW OF SUPPLY• As Price Rises……Quantity Supplied Rises• As Price Falls……Quantity Supplied FallsA direct relationship exists betweenprice and quantity supplied
  23. 23. 3 - 23Copyright McGraw-Hill/Irwin, 2002MarketsDemand DefinedDemand GraphedChanges in DemandSupply DefinedSupply GraphedChanges in SupplyEquilibriumSurplusesShortagesKey TermsPreviousSlideNextSlideEndShowDETERMINANTS OFSUPPLY• Resource Prices• Technology• Taxes & Subsidies• Prices of Other Goods• Price Expectations• Number of Sellers
  24. 24. 3 - 24Copyright McGraw-Hill/Irwin, 2002MarketsDemand DefinedDemand GraphedChanges in DemandSupply DefinedSupply GraphedChanges in SupplyEquilibriumSurplusesShortagesKey TermsPreviousSlideNextSlideEndShow5PQo$5432110 20 30 40 50 60 70 80$54321605035205P QSPrice of CornQuantity of CornCORNPlot the PointsGRAPHING SUPPLY
  25. 25. 3 - 25Copyright McGraw-Hill/Irwin, 2002MarketsDemand DefinedDemand GraphedChanges in DemandSupply DefinedSupply GraphedChanges in SupplyEquilibriumSurplusesShortagesKey TermsPreviousSlideNextSlideEndShowPQo$5432110 20 30 40 50 60 70 80$54321605035205P QSPrice of CornQuantity of CornCORNPlot the PointsGRAPHING SUPPLY
  26. 26. 3 - 26Copyright McGraw-Hill/Irwin, 2002MarketsDemand DefinedDemand GraphedChanges in DemandSupply DefinedSupply GraphedChanges in SupplyEquilibriumSurplusesShortagesKey TermsPreviousSlideNextSlideEndShow35PQo$5432110 20 30 40 50 60 70 80$54321605035205P QSPrice of CornQuantity of CornCORNPlot the PointsGRAPHING SUPPLY
  27. 27. 3 - 27Copyright McGraw-Hill/Irwin, 2002MarketsDemand DefinedDemand GraphedChanges in DemandSupply DefinedSupply GraphedChanges in SupplyEquilibriumSurplusesShortagesKey TermsPreviousSlideNextSlideEndShowPQo$5432110 20 30 40 50 60 70 80$54321605035205P QSPrice of CornQuantity of CornCORNPlot the PointsGRAPHING SUPPLY
  28. 28. 3 - 28Copyright McGraw-Hill/Irwin, 2002MarketsDemand DefinedDemand GraphedChanges in DemandSupply DefinedSupply GraphedChanges in SupplyEquilibriumSurplusesShortagesKey TermsPreviousSlideNextSlideEndShowPQo$5432110 20 30 40 50 60 70 80$54321605035205P QSPrice of CornQuantity of CornCORNPlot the PointsGRAPHING SUPPLY
  29. 29. 3 - 29Copyright McGraw-Hill/Irwin, 2002MarketsDemand DefinedDemand GraphedChanges in DemandSupply DefinedSupply GraphedChanges in SupplyEquilibriumSurplusesShortagesKey TermsPreviousSlideNextSlideEndShowSPQo$5432110 20 30 40 50 60 70 80$54321605035205P QSPrice of CornQuantity of CornCORNPlot the PointsConnect the PointsGRAPHING SUPPLY
  30. 30. 3 - 30Copyright McGraw-Hill/Irwin, 2002MarketsDemand DefinedDemand GraphedChanges in DemandSupply DefinedSupply GraphedChanges in SupplyEquilibriumSurplusesShortagesKey TermsPreviousSlideNextSlideEndShowSPQo$5432110 20 30 40 50 60 70 80$54321605035205P QSPrice of CornQuantity of CornCORNWhat ifSupplyIncreases?GRAPHING SUPPLY
  31. 31. 3 - 31Copyright McGraw-Hill/Irwin, 2002MarketsDemand DefinedDemand GraphedChanges in DemandSupply DefinedSupply GraphedChanges in SupplyEquilibriumSurplusesShortagesKey TermsPreviousSlideNextSlideEndShowSPQo$5432110 20 30 40 50 60 70 80Price of CornQuantity of Corn$54321605035205P QSCORN8070604530S’IncreaseinSupplyIncreasein QuantitySuppliedGRAPHING SUPPLY
  32. 32. 3 - 32Copyright McGraw-Hill/Irwin, 2002MarketsDemand DefinedDemand GraphedChanges in DemandSupply DefinedSupply GraphedChanges in SupplyEquilibriumSurplusesShortagesKey TermsPreviousSlideNextSlideEndShowSPQo$5432110 20 30 40 50 60 70 80$54321605035205P QSPrice of CornQuantity of CornCORNWhat ifSupplyDecreases?GRAPHING SUPPLY
  33. 33. 3 - 33Copyright McGraw-Hill/Irwin, 2002MarketsDemand DefinedDemand GraphedChanges in DemandSupply DefinedSupply GraphedChanges in SupplyEquilibriumSurplusesShortagesKey TermsPreviousSlideNextSlideEndShowSPQo$5432110 20 30 40 50 60 70 80$54321605035205P QSPrice of CornQuantity of CornCORNS’4530200--DecreaseinSupplyDecreasein QuantitySuppliedGRAPHING SUPPLY
  34. 34. 3 - 34Copyright McGraw-Hill/Irwin, 2002MarketsDemand DefinedDemand GraphedChanges in DemandSupply DefinedSupply GraphedChanges in SupplyEquilibriumSurplusesShortagesKey TermsPreviousSlideNextSlideEndShowSPQo$5432110 20 30 40 50 60 70 80$54321605035205P QSPrice of CornQuantity of CornCORNCombiningwithDemandGRAPHING SUPPLY
  35. 35. 3 - 35Copyright McGraw-Hill/Irwin, 2002MarketsDemand DefinedDemand GraphedChanges in DemandSupply DefinedSupply GraphedChanges in SupplyEquilibriumSurplusesShortagesKey TermsPreviousSlideNextSlideEndShowMARKET DEMAND &SUPPLY$543211020355580$54321605035205x200BUYERSP QDBUSHELSOF CORNMARKETDEMAND2,0004,0007,00011,00016,000x200SELLERS12,00010,0007,0004,0001,000P QSBUSHELSOF CORNMARKETSUPPLYEQUILIBRIUMGraphically…
  36. 36. 3 - 36Copyright McGraw-Hill/Irwin, 2002MarketsDemand DefinedDemand GraphedChanges in DemandSupply DefinedSupply GraphedChanges in SupplyEquilibriumSurplusesShortagesKey TermsPreviousSlideNextSlideEndShow7SPQo$543212 4 6 8 10 12 14 16P QD$543212,0004,0007,00011,00016,000$5432112,00010,0007,0004,0001,000DP QSPrice of CornQuantity of CornCORNMARKETCORNMARKETMarketClearingEquilibriumMARKET DEMAND &SUPPLY
  37. 37. 3 - 37Copyright McGraw-Hill/Irwin, 2002MarketsDemand DefinedDemand GraphedChanges in DemandSupply DefinedSupply GraphedChanges in SupplyEquilibriumSurplusesShortagesKey TermsPreviousSlideNextSlideEndShow7SPQo$543212 4 6 8 10 12 14 16P QD$543212,0004,0007,00011,00016,000$5432112,00010,0007,0004,0001,000DP QSPrice of CornQuantity of CornCORNMARKETCORNMARKETSurplusAt a $4 pricemore is beingsupplied thandemandedMARKET DEMAND &SUPPLY
  38. 38. 3 - 38Copyright McGraw-Hill/Irwin, 2002MarketsDemand DefinedDemand GraphedChanges in DemandSupply DefinedSupply GraphedChanges in SupplyEquilibriumSurplusesShortagesKey TermsPreviousSlideNextSlideEndShow117SPQo$543212 4 6 8 10 12 14 16P QD$543212,0004,0007,00011,00016,000$5432112,00010,0007,0004,0001,000DP QSPrice of CornQuantity of CornCORNMARKETCORNMARKETAt a $2 pricemore is beingdemanded thansuppliedShortageMARKET DEMAND &SUPPLY
  39. 39. 3 - 39Copyright McGraw-Hill/Irwin, 2002MarketsDemand DefinedDemand GraphedChanges in DemandSupply DefinedSupply GraphedChanges in SupplyEquilibriumSurplusesShortagesKey TermsPreviousSlideNextSlideEndShowMARKET EQUILIBRIUM• Equilibrium Price & Quantity• Rationing Function of Prices• Changes in Demand• Changes in QuantityDemanded• Changes in Supply• Changes in Quantity Supplied
  40. 40. 3 - 40Copyright McGraw-Hill/Irwin, 2002MarketsDemand DefinedDemand GraphedChanges in DemandSupply DefinedSupply GraphedChanges in SupplyEquilibriumSurplusesShortagesKey TermsPreviousSlideNextSlideEndShowMARKET EQUILIBRIUM• Equilibrium Price & Quantity• Rationing Function of Prices• Changes in Demand• Changes in QuantityDemanded• Changes in Supply• Changes in Quantity SuppliedComplex CasesMultiple Shifts
  41. 41. 3 - 41Copyright McGraw-Hill/Irwin, 2002MarketsDemand DefinedDemand GraphedChanges in DemandSupply DefinedSupply GraphedChanges in SupplyEquilibriumSurplusesShortagesKey TermsPreviousSlideNextSlideEndShow• Equilibrium Price & Quantity• Rationing Function of Prices• Changes in Demand• Changes in QuantityDemanded• Changes in Supply• Changes in Quantity SuppliedChapterConclusionMARKET EQUILIBRIUM
  42. 42. Key Termsmarketdemanddemand schedulelaw of demanddiminishing marginal utilityincome effectsubstitution effectdemand curvedeterminants of demandnormal goodsinferior goodssubstitute goodcomplementary goodchange in demandchange in quantity demandedsupplysupply schedulelaw of supplysupply curvedeterminants of supplychange in supplychange in quantity suppliedsurplusshortageequilibrium priceequilibrium quantityrationing function of pricesCopyright McGraw-Hill/Irwin, 2002 BACK END
  43. 43. 3 - 43Copyright McGraw-Hill/Irwin, 2002MarketsDemand DefinedDemand GraphedChanges in DemandSupply DefinedSupply GraphedChanges in SupplyEquilibriumSurplusesShortagesKey TermsPreviousSlideNextSlideEndShowNext:Chapter 4

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