0
Supply and Demand Unit 4:  Microeconomics
I.  Demand
A.  Description <ul><ul><li>Demand is the desire to own something and the ability to pay for it. </li></ul></ul><ul><ul><l...
B.  Changes in Demand <ul><li>Substitution Effect: $  , the demand will be effected by substitutes available. </li></ul><u...
<ul><li>3.  Income effect:  Income rises, the demand will be effected in two different ways: </li></ul><ul><ul><li>Normal ...
<ul><li>Consumer expectations:  Customers know there is a sale, they will not buy this week. </li></ul>
5.  Population:  Population changes in age, goods demanded change.
6.  Tastes and advertising:  Waves of popularity & advertising will impact demand.
7.  Related goods:  Complements are goods that are bought together.
C.  Extreme Demand <ul><li>Supply shock is when there is a severe shortage. </li></ul>
2.  Government may intervene with rationing
a.  WWII is an example of high demand, rationing rubber, fuel, nylon, etc.
b.  1970’s:  Gasoline rationing.
II.  Supply
A.  Description <ul><li>Production </li></ul><ul><li>Law of Supply:  </li></ul>Prices go up… Supply goes up. Prices goes d...
B.  Changes in Supply <ul><li>Rising Costs:  Costs of production will cause a decrease in supply.  </li></ul>
2.  Technology:  Efficiency in production will increase production and supply.
3.  Subsidy:  Government financial assistance for producers.
4.  Excise tax:  Tax on the production, distribution,  sale of product.
5.  Regulation:  Limits on the production will decrease supply.
III.  Supply and Demand Together
A.  Equilibrium Equilibrium Price Surplus Shortage Demand Supply Price Floor : Minimum Wage Price Ceiling:  Rent Control
B.  Elasticity <ul><li>Elasticity of demand:  Sensitivity of demand of consumers to price change.  </li></ul>
1.  Elastic:  Items that are highly sensitive to price change.
2.  Inelastic:  Items that are not sensitive to price.
3.  Elasticity of supply:  Sensitivity of suppliers to price change.
a. Elastic:  Suppliers will be able to produce more or less of a product due to changes of prices in the market.
b.  Inelastic:  Suppliers will not be able to produce more or less of a product.
C.  Companies and Pricing <ul><li>Suppliers must take into account, the bills they have when producing: </li></ul>
1.  Fixed Costs :  Same monthly.
2.  Variable Costs:  Varies monthly.
3.  Fixed + Variable = Total
4.  Adding labor (more workers is not always good):
a.  At first, each additional worker increases output more. (Increasing Marginal Returns)
b.  Eventually output will still increase, but more slowly. (Diminishing marginal returns).
c.  Soon, production will drop with each worker added.  (Negative marginal returns).
IV.  Market Structure <ul><li>A. Organizational Chart  </li></ul>
Business Organization Number of Firms Variety of Goods Barriers to Entry Control Over Prices Example Perfect Competition M...
Business Organization Number of Firms Variety of Goods Barriers to Entry Control Over Prices Example Perfect Competition M...
Business Organization Number of Firms Variety of Goods Barriers to Entry Control Over Prices Example Perfect Competition M...
Business Organization Number of Firms Variety of Goods Barriers to Entry Control Over Prices Example Perfect Competition M...
Business Organization Number of Firms Variety of Goods Barriers to Entry Control Over Prices Example Perfect Competition M...
Business Organization Number of Firms Variety of Goods Barriers to Entry Control Over Prices Example Perfect Competition M...
Business Organization Number of Firms Variety of Goods Barriers to Entry Control Over Prices Example Perfect Competition M...
Business Organization Number of Firms Variety of Goods Barriers to Entry Control Over Prices Example Perfect Competition M...
Business Organization Number of Firms Variety of Goods Barriers to Entry Control Over Prices Example Perfect Competition M...
Business Organization Number of Firms Variety of Goods Barriers to Entry Control Over Prices Example Perfect Competition M...
Business Organization Number of Firms Variety of Goods Barriers to Entry Control Over Prices Example Perfect Competition M...
Business Organization Number of Firms Variety of Goods Barriers to Entry Control Over Prices Example Perfect Competition M...
Business Organization Number of Firms Variety of Goods Barriers to Entry Control Over Prices Example Perfect Competition M...
Business Organization Number of Firms Variety of Goods Barriers to Entry Control Over Prices Example Perfect Competition M...
Business Organization Number of Firms Variety of Goods Barriers to Entry Control Over Prices Example Perfect Competition M...
Business Organization Number of Firms Variety of Goods Barriers to Entry Control Over Prices Example Perfect Competition M...
Business Organization Number of Firms Variety of Goods Barriers to Entry Control Over Prices Example Perfect Competition M...
Business Organization Number of Firms Variety of Goods Barriers to Entry Control Over Prices Example Perfect Competition M...
Business Organization Number of Firms Variety of Goods Barriers to Entry Control Over Prices Example Perfect Competition M...
Business Organization Number of Firms Variety of Goods Barriers to Entry Control Over Prices Example Perfect Competition M...
Business Organization Number of Firms Variety of Goods Barriers to Entry Control Over Prices Example Perfect Competition M...
D.  Perfect and Monopolistic Competition <ul><li>Perfect competition is tough market </li></ul><ul><li>Farmers are example...
E.  Monopolies and Oligopoly <ul><li>Monopolies virtually banned by Anti-trust Laws </li></ul><ul><li>Natural Monopolies s...
Upcoming SlideShare
Loading in...5
×

Unit 4 microeconomics general

734

Published on

Published in: Business, Technology
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total Views
734
On Slideshare
0
From Embeds
0
Number of Embeds
1
Actions
Shares
0
Downloads
23
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Transcript of "Unit 4 microeconomics general"

  1. 1. Supply and Demand Unit 4: Microeconomics
  2. 2. I. Demand
  3. 3. A. Description <ul><ul><li>Demand is the desire to own something and the ability to pay for it. </li></ul></ul><ul><ul><li>Law of demand: </li></ul></ul>PRICE As price goes down… DEMAND Quantity demanded goes up. PRICE As price goes up… DEMAND Quantity demanded goes down.
  4. 4. B. Changes in Demand <ul><li>Substitution Effect: $ , the demand will be effected by substitutes available. </li></ul><ul><li>Substitutes are goods used in place of another. </li></ul>
  5. 5. <ul><li>3. Income effect: Income rises, the demand will be effected in two different ways: </li></ul><ul><ul><li>Normal goods: If wealthier, they will buy more of. </li></ul></ul><ul><ul><li>Inferior goods: If wealthier, they will buy less of. </li></ul></ul>
  6. 6. <ul><li>Consumer expectations: Customers know there is a sale, they will not buy this week. </li></ul>
  7. 7. 5. Population: Population changes in age, goods demanded change.
  8. 8. 6. Tastes and advertising: Waves of popularity & advertising will impact demand.
  9. 9. 7. Related goods: Complements are goods that are bought together.
  10. 10. C. Extreme Demand <ul><li>Supply shock is when there is a severe shortage. </li></ul>
  11. 11. 2. Government may intervene with rationing
  12. 12. a. WWII is an example of high demand, rationing rubber, fuel, nylon, etc.
  13. 13. b. 1970’s: Gasoline rationing.
  14. 14. II. Supply
  15. 15. A. Description <ul><li>Production </li></ul><ul><li>Law of Supply: </li></ul>Prices go up… Supply goes up. Prices goes down… Supply goes down.
  16. 16. B. Changes in Supply <ul><li>Rising Costs: Costs of production will cause a decrease in supply. </li></ul>
  17. 17. 2. Technology: Efficiency in production will increase production and supply.
  18. 18. 3. Subsidy: Government financial assistance for producers.
  19. 19. 4. Excise tax: Tax on the production, distribution, sale of product.
  20. 20. 5. Regulation: Limits on the production will decrease supply.
  21. 21. III. Supply and Demand Together
  22. 22. A. Equilibrium Equilibrium Price Surplus Shortage Demand Supply Price Floor : Minimum Wage Price Ceiling: Rent Control
  23. 23. B. Elasticity <ul><li>Elasticity of demand: Sensitivity of demand of consumers to price change. </li></ul>
  24. 24. 1. Elastic: Items that are highly sensitive to price change.
  25. 25. 2. Inelastic: Items that are not sensitive to price.
  26. 26. 3. Elasticity of supply: Sensitivity of suppliers to price change.
  27. 27. a. Elastic: Suppliers will be able to produce more or less of a product due to changes of prices in the market.
  28. 28. b. Inelastic: Suppliers will not be able to produce more or less of a product.
  29. 29. C. Companies and Pricing <ul><li>Suppliers must take into account, the bills they have when producing: </li></ul>
  30. 30. 1. Fixed Costs : Same monthly.
  31. 31. 2. Variable Costs: Varies monthly.
  32. 32. 3. Fixed + Variable = Total
  33. 33. 4. Adding labor (more workers is not always good):
  34. 34. a. At first, each additional worker increases output more. (Increasing Marginal Returns)
  35. 35. b. Eventually output will still increase, but more slowly. (Diminishing marginal returns).
  36. 36. c. Soon, production will drop with each worker added. (Negative marginal returns).
  37. 37. IV. Market Structure <ul><li>A. Organizational Chart </li></ul>
  38. 38. Business Organization Number of Firms Variety of Goods Barriers to Entry Control Over Prices Example Perfect Competition Monopoly Monopolistic Competition Oligopoly
  39. 39. Business Organization Number of Firms Variety of Goods Barriers to Entry Control Over Prices Example Perfect Competition Many Monopoly Monopolistic Competition Oligopoly
  40. 40. Business Organization Number of Firms Variety of Goods Barriers to Entry Control Over Prices Example Perfect Competition Many None, Identical Monopoly Monopolistic Competition Oligopoly
  41. 41. Business Organization Number of Firms Variety of Goods Barriers to Entry Control Over Prices Example Perfect Competition Many None, Identical None, Easy to start Monopoly Monopolistic Competition Oligopoly
  42. 42. Business Organization Number of Firms Variety of Goods Barriers to Entry Control Over Prices Example Perfect Competition Many None, Identical None, Easy to start None, Supply & Demand Monopoly Monopolistic Competition Oligopoly
  43. 43. Business Organization Number of Firms Variety of Goods Barriers to Entry Control Over Prices Example Perfect Competition Many None, Identical None, Easy to start None, Supply & Demand Farms, Stocks Monopoly Monopolistic Competition Oligopoly
  44. 44. Business Organization Number of Firms Variety of Goods Barriers to Entry Control Over Prices Example Perfect Competition Many None, Identical None, Easy to start None, Supply & Demand Farms, Stocks Monopoly One Monopolistic Competition Oligopoly
  45. 45. Business Organization Number of Firms Variety of Goods Barriers to Entry Control Over Prices Example Perfect Competition Many None, Identical None, Easy to start None, Supply & Demand Farms, Stocks Monopoly One Unique Good Monopolistic Competition Oligopoly
  46. 46. Business Organization Number of Firms Variety of Goods Barriers to Entry Control Over Prices Example Perfect Competition Many None, Identical None, Easy to start None, Supply & Demand Farms, Stocks Monopoly One Unique Good Difficult To Start &Hold Monopolistic Competition Oligopoly
  47. 47. Business Organization Number of Firms Variety of Goods Barriers to Entry Control Over Prices Example Perfect Competition Many None, Identical None, Easy to start None, Supply & Demand Farms, Stocks Monopoly One Unique Good Difficult To Start &Hold Full Control Monopolistic Competition Oligopoly
  48. 48. Business Organization Number of Firms Variety of Goods Barriers to Entry Control Over Prices Example Perfect Competition Many None, Identical None, Easy to start None, Supply & Demand Farms, Stocks Monopoly One Unique Good Difficult To Start &Hold Full Control City Sewage Monopolistic Competition Oligopoly
  49. 49. Business Organization Number of Firms Variety of Goods Barriers to Entry Control Over Prices Example Perfect Competition Many None, Identical None, Easy to start None, Supply & Demand Farms, Stocks Monopoly One Unique Good Difficult To Start &Hold Full Control City Sewage Monopolistic Competition Many Oligopoly
  50. 50. Business Organization Number of Firms Variety of Goods Barriers to Entry Control Over Prices Example Perfect Competition Many None, Identical None, Easy to start None, Supply & Demand Farms, Stocks Monopoly One Unique Good Difficult To Start &Hold Full Control City Sewage Monopolistic Competition Many Similar, Sub- stitutes Oligopoly
  51. 51. Business Organization Number of Firms Variety of Goods Barriers to Entry Control Over Prices Example Perfect Competition Many None, Identical None, Easy to start None, Supply & Demand Farms, Stocks Monopoly One Unique Good Difficult To Start &Hold Full Control City Sewage Monopolistic Competition Many Similar, Sub- stitutes Few Oligopoly
  52. 52. Business Organization Number of Firms Variety of Goods Barriers to Entry Control Over Prices Example Perfect Competition Many None, Identical None, Easy to start None, Supply & Demand Farms, Stocks Monopoly One Unique Good Difficult To Start &Hold Full Control City Sewage Monopolistic Competition Many Similar, Sub- stitutes Few Some Oligopoly
  53. 53. Business Organization Number of Firms Variety of Goods Barriers to Entry Control Over Prices Example Perfect Competition Many None, Identical None, Easy to start None, Supply & Demand Farms, Stocks Monopoly One Unique Good Difficult To Start &Hold Full Control City Sewage Monopolistic Competition Many Similar, Sub- stitutes Few Some Clothing, Barbers Oligopoly
  54. 54. Business Organization Number of Firms Variety of Goods Barriers to Entry Control Over Prices Example Perfect Competition Many None, Identical None, Easy to start None, Supply & Demand Farms, Stocks Monopoly One Unique Good Difficult To Start &Hold Full Control City Sewage Monopolistic Competition Many Similar, Sub- stitutes Few Some Clothing, Barbers Oligopoly Few
  55. 55. Business Organization Number of Firms Variety of Goods Barriers to Entry Control Over Prices Example Perfect Competition Many None, Identical None, Easy to start None, Supply & Demand Farms, Stocks Monopoly One Unique Good Difficult To Start &Hold Full Control City Sewage Monopolistic Competition Many Similar, Sub- stitutes Few Some Clothing, Barbers Oligopoly Few Similar, Sub- stitutes
  56. 56. Business Organization Number of Firms Variety of Goods Barriers to Entry Control Over Prices Example Perfect Competition Many None, Identical None, Easy to start None, Supply & Demand Farms, Stocks Monopoly One Unique Good Difficult To Start &Hold Full Control City Sewage Monopolistic Competition Many Similar, Sub- stitutes Few Some Clothing, Barbers Oligopoly Few Similar, Sub- stitutes Many, Ex- pensive
  57. 57. Business Organization Number of Firms Variety of Goods Barriers to Entry Control Over Prices Example Perfect Competition Many None, Identical None, Easy to start None, Supply & Demand Farms, Stocks Monopoly One Unique Good Difficult To Start &Hold Full Control City Sewage Monopolistic Competition Many Similar, Sub- stitutes Few Some Clothing, Barbers Oligopoly Few Similar, Sub- stitutes Many, Ex- pensive Some
  58. 58. Business Organization Number of Firms Variety of Goods Barriers to Entry Control Over Prices Example Perfect Competition Many None, Identical None, Easy to start None, Supply & Demand Farms, Stocks Monopoly One Unique Good Difficult To Start &Hold Full Control City Sewage Monopolistic Competition Many Similar, Sub- stitutes Few Some Clothing, Barbers Oligopoly Few Similar, Sub- stitutes Many, Ex- pensive Some Auto, Cereal
  59. 59. D. Perfect and Monopolistic Competition <ul><li>Perfect competition is tough market </li></ul><ul><li>Farmers are example, make little profit </li></ul><ul><li>Monopolistic competition fare better due unique twist they have on product. </li></ul>
  60. 60. E. Monopolies and Oligopoly <ul><li>Monopolies virtually banned by Anti-trust Laws </li></ul><ul><li>Natural Monopolies still exist </li></ul><ul><ul><li>Geographic – last gas station for miles </li></ul></ul><ul><ul><li>Governmental – only cable company allowed in town </li></ul></ul><ul><ul><li>Technological – patents for new products </li></ul></ul><ul><li>Oligopoly companies are forbidden from cooperating with each other (collusion) </li></ul>
  1. A particular slide catching your eye?

    Clipping is a handy way to collect important slides you want to go back to later.

×