• Save

Loading…

Flash Player 9 (or above) is needed to view presentations.
We have detected that you do not have it on your computer. To install it, go here.

Like this presentation? Why not share!

Like this? Share it with your network

Share

Demand and Supply

on

  • 1,232 views

 

Statistics

Views

Total Views
1,232
Views on SlideShare
1,232
Embed Views
0

Actions

Likes
2
Downloads
0
Comments
1

0 Embeds 0

No embeds

Accessibility

Upload Details

Uploaded via as Microsoft PowerPoint

Usage Rights

© All Rights Reserved

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Processing…
  • nice work
    Are you sure you want to
    Your message goes here
    Processing…
Post Comment
Edit your comment

Demand and Supply Presentation Transcript

  • 1. Demand & Supply
  • 2. POTENTIAL
    SELLERS
    POTENTIAL
    BUYERS
    MARKETS DEFINED
    MARKETS
  • 3. P
    QD
    DEMAND DEFINED
    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.
    $5
    4
    3
    2
    1
    10
    20
    35
    55
    80
  • 4. LAW OF DEMAND
    An inverse relationship exists between price and quantity demanded
    As Price Falls…
    …Quantity Demanded Rises
    As Price Rises…
    …Quantity Demanded Falls
  • 5. LAW OF DEMAND
    Diminishing Marginal Utility
  • 6. LAW OF DEMAND
    Diminishing Marginal Utility
    • Income Effect
  • LAW OF DEMAND
    Diminishing Marginal Utility
    • Income Effect
    • 7. Substitution Effect
  • P
    QD
    GRAPHING DEMAND
    Price of Corn
    P
    $5
    4
    3
    2
    1
    Plot the Points
    CORN
    10
    20
    35
    55
    80
    $5
    4
    3
    2
    1
    o
    Q
    10 20 30 40 50 60 70 80
    Quantity of Corn
  • 8. P
    QD
    GRAPHING DEMAND
    Price of Corn
    P
    $5
    4
    3
    2
    1
    Plot the Points
    CORN
    10
    20
    35
    55
    80
    $5
    4
    3
    2
    1
    o
    55
    Q
    10 20 30 40 50 60 70 80
    Quantity of Corn
  • 9. P
    QD
    GRAPHING DEMAND
    Price of Corn
    P
    $5
    4
    3
    2
    1
    Plot the Points
    CORN
    10
    20
    35
    55
    80
    $5
    4
    3
    2
    1
    o
    Q
    10 20 30 40 50 60 70 80
    35
    Quantity of Corn
  • 10. P
    QD
    GRAPHING DEMAND
    Price of Corn
    P
    $5
    4
    3
    2
    1
    Plot the Points
    CORN
    10
    20
    35
    55
    80
    $5
    4
    3
    2
    1
    o
    Q
    10 20 30 40 50 60 70 80
    Quantity of Corn
  • 11. P
    QD
    GRAPHING DEMAND
    Price of Corn
    P
    $5
    4
    3
    2
    1
    Plot the Points
    CORN
    10
    20
    35
    55
    80
    $5
    4
    3
    2
    1
    o
    Q
    10 20 30 40 50 60 70 80
    Quantity of Corn
  • 12. P
    QD
    GRAPHING DEMAND
    Price of Corn
    P
    $5
    4
    3
    2
    1
    Connect the Points
    CORN
    10
    20
    35
    55
    80
    $5
    4
    3
    2
    1
    D
    o
    Q
    10 20 30 40 50 60 70 80
    Quantity of Corn
  • 13. P
    QD
    GRAPHING DEMAND
    Price of Corn
    What if
    Demand
    Increases?
    P
    $5
    4
    3
    2
    1
    CORN
    10
    20
    35
    55
    80
    $5
    4
    3
    2
    1
    D
    o
    Q
    10 20 30 40 50 60 70 80
    Quantity of Corn
  • 14. P
    QD
    GRAPHING DEMAND
    Price of Corn
    Increase
    in Quantity
    Demanded
    P
    $5
    4
    3
    2
    1
    CORN
    30
    40
    60
    80
    +
    10
    20
    35
    55
    80
    $5
    4
    3
    2
    1
    Increase
    in
    Demand
    D’
    D
    o
    Q
    10 20 30 40 50 60 70 80
    Quantity of Corn
  • 15. P
    QD
    GRAPHING DEMAND
    Price of Corn
    What if
    Demand
    Decreases?
    P
    $5
    4
    3
    2
    1
    CORN
    10
    20
    35
    55
    80
    $5
    4
    3
    2
    1
    D
    o
    Q
    10 20 30 40 50 60 70 80
    Quantity of Corn
  • 16. P
    QD
    GRAPHING DEMAND
    Price of Corn
    P
    Decrease
    in Quantity
    Demanded
    $5
    4
    3
    2
    1
    CORN
    --
    10
    20
    40
    60
    10
    20
    35
    55
    80
    $5
    4
    3
    2
    1
    Decrease
    in
    Demand
    D
    D’
    o
    Q
    10 20 30 40 50 60 70 80
    Quantity of Corn
  • 17. DETERMINANTS OF DEMAND
    Tastes
    Number of Buyers
    Income
    Normal (Superior) & Inferior Goods
    Prices of Related Goods
    Substitutes & Complements
    Unrelated Goods
    Expectations
  • 18. P
    QS
    SUPPLY DEFINED
    CORN
    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.
    $1
    2
    3
    4
    5
    5
    20
    35
    50
    60
  • 19. LAW OF SUPPLY
    A direct relationship exists between price and quantity supplied
    As Price Rises…
    …Quantity Supplied Rises
    As Price Falls…
    …Quantity Supplied Falls
  • 20. P
    QS
    GRAPHING SUPPLY
    Plot the Points
    Price of Corn
    P
    $5
    4
    3
    2
    1
    CORN
    $5
    4
    3
    2
    1
    60
    50
    35
    20
    5
    o
    5
    Q
    10 20 30 40 50 60 70 80
    Quantity of Corn
  • 21. P
    QS
    GRAPHING SUPPLY
    Plot the Points
    Price of Corn
    P
    $5
    4
    3
    2
    1
    CORN
    $5
    4
    3
    2
    1
    60
    50
    35
    20
    5
    o
    Q
    10 20 30 40 50 60 70 80
    Quantity of Corn
  • 22. P
    QS
    GRAPHING SUPPLY
    Plot the Points
    Price of Corn
    P
    $5
    4
    3
    2
    1
    CORN
    $5
    4
    3
    2
    1
    60
    50
    35
    20
    5
    o
    35
    Q
    10 20 30 40 50 60 70 80
    Quantity of Corn
  • 23. P
    QS
    GRAPHING SUPPLY
    Plot the Points
    Price of Corn
    P
    $5
    4
    3
    2
    1
    CORN
    $5
    4
    3
    2
    1
    60
    50
    35
    20
    5
    o
    Q
    10 20 30 40 50 60 70 80
    Quantity of Corn
  • 24. P
    QS
    GRAPHING SUPPLY
    Plot the Points
    Price of Corn
    P
    $5
    4
    3
    2
    1
    CORN
    $5
    4
    3
    2
    1
    60
    50
    35
    20
    5
    o
    Q
    10 20 30 40 50 60 70 80
    Quantity of Corn
  • 25. P
    QS
    GRAPHING SUPPLY
    Price of Corn
    P
    S
    $5
    4
    3
    2
    1
    CORN
    $5
    4
    3
    2
    1
    60
    50
    35
    20
    5
    Connect the Points
    o
    Q
    10 20 30 40 50 60 70 80
    Quantity of Corn
  • 26. P
    QS
    GRAPHING SUPPLY
    Price of Corn
    P
    What if
    Supply
    Increases?
    S
    $5
    4
    3
    2
    1
    CORN
    $5
    4
    3
    2
    1
    60
    50
    35
    20
    5
    o
    Q
    10 20 30 40 50 60 70 80
    Quantity of Corn
  • 27. P
    QS
    GRAPHING SUPPLY
    Price of Corn
    Increase
    in
    Supply
    P
    S’
    S
    $5
    4
    3
    2
    1
    CORN
    80
    70
    60
    45
    30
    $5
    4
    3
    2
    1
    60
    50
    35
    20
    5
    Increase
    in Quantity
    Supplied
    o
    Q
    10 20 30 40 50 60 70 80
    Quantity of Corn
  • 28. P
    QS
    GRAPHING SUPPLY
    Price of Corn
    P
    What if
    Supply
    Decreases?
    S
    $5
    4
    3
    2
    1
    CORN
    $5
    4
    3
    2
    1
    60
    50
    35
    20
    5
    o
    Q
    10 20 30 40 50 60 70 80
    Quantity of Corn
  • 29. P
    QS
    GRAPHING SUPPLY
    Decrease
    in
    Supply
    Price of Corn
    S’
    P
    S
    $5
    4
    3
    2
    1
    CORN
    45
    30
    20
    0
    --
    $5
    4
    3
    2
    1
    60
    50
    35
    20
    5
    Decrease
    in Quantity
    Supplied
    o
    Q
    10 20 30 40 50 60 70 80
    Quantity of Corn
  • 30. DETERMINANTS OF SUPPLY
    Resource Prices
    Technology
    Taxes & Subsidies
    Prices of Other Goods
    Price Expectations
    Number of Sellers
  • 31. DETERMINANTS OF SUPPLY
    Resource Prices
    Technology
    Taxes & Subsidies
    Prices of Other Goods
    Price Expectations
    Number of Sellers
    Combining
    with
    Demand
  • 32. BUSHELS
    OF CORN
    BUSHELS
    OF CORN
    P
    QS
    P
    QD
    MARKET DEMAND & SUPPLY
    MARKET
    DEMAND
    MARKET
    SUPPLY
    200
    B
    U
    Y
    E
    R
    S
    200
    S
    E
    L
    L
    E
    R
    S
    10
    20
    35
    55
    80
    2,000
    4,000
    7,000
    11,000
    16,000
    12,000
    10,000
    7,000
    4,000
    1,000
    $5
    4
    3
    2
    1
    $5
    4
    3
    2
    1
    60
    50
    35
    20
    5
    x
    x
    Graphically…
    EQUILIBRIUM
  • 33. P
    QD
    P
    QS
    MARKET DEMAND & SUPPLY
    Price of Corn
    P
    CORN
    MARKET
    CORN
    MARKET
    S
    $5
    4
    3
    2
    1
    2,000
    4,000
    7,000
    11,000
    16,000
    $5
    4
    3
    2
    1
    $5
    4
    3
    2
    1
    12,000
    10,000
    7,000
    4,000
    1,000
    Market
    Clearing
    Equilibrium
    D
    7
    o
    Q
    2 4 6 8 10 12 14 16
    Quantity of Corn
  • 34. P
    QD
    P
    QS
    MARKET DEMAND & SUPPLY
    Price of Corn
    P
    CORN
    MARKET
    CORN
    MARKET
    S
    Surplus
    $5
    4
    3
    2
    1
    At a $4 price
    more is being
    supplied than
    demanded
    2,000
    4,000
    7,000
    11,000
    16,000
    $5
    4
    3
    2
    1
    $5
    4
    3
    2
    1
    12,000
    10,000
    7,000
    4,000
    1,000
    D
    7
    o
    Q
    2 4 6 8 10 12 14 16
    Quantity of Corn
  • 35. P
    QD
    P
    QS
    MARKET DEMAND & SUPPLY
    Price of Corn
    P
    CORN
    MARKET
    CORN
    MARKET
    S
    $5
    4
    3
    2
    1
    At a $2 price
    more is being
    demanded than
    supplied
    2,000
    4,000
    7,000
    11,000
    16,000
    $5
    4
    3
    2
    1
    $5
    4
    3
    2
    1
    12,000
    10,000
    7,000
    4,000
    1,000
    Shortage
    D
    11
    7
    o
    Q
    2 4 6 8 10 12 14 16
    Quantity of Corn
  • 36. P
    QD
    P
    QS
    MARKET DEMAND & SUPPLY
    Price of Corn
    P
    CORN
    MARKET
    CORN
    MARKET
    S
    Surplus
    $5
    4
    3
    2
    1
    2,000
    4,000
    7,000
    11,000
    16,000
    $5
    4
    3
    2
    1
    $5
    4
    3
    2
    1
    12,000
    10,000
    7,000
    4,000
    1,000
    Shortage
    D
    11
    7
    o
    Q
    2 4 6 8 10 12 14 16
    Quantity of Corn
  • 37. Equilibrium
    Equilibrium price – the price toward which the invisible hand drives the market.
    • Equilibrium quantity – the amount bought and sold at the equilibrium price.
  • What Equilibrium Isn’t
    Equilibrium isn’t a state of the world, it is a characteristic of a model.
    Equilibrium isn’t inherently good or bad, it is simply a state in which dynamic pressures offset each other.
    When the market is not in equilibrium, you get either excess supply or excess demand, and a tendency for price to change.
  • 38. Excess Supply
    Excess supply – a surplus, the quantity supplied is greater than quantity demanded
    Prices tend to fall.
  • 39. Excess Demand
    Excess demand – a shortage, the quantity demanded is greater than quantity supplied
    Prices tend to rise.
  • 40. Price Adjusts
    The greater the difference between quantity supplied and quantity demanded, the more pressure there is for prices to rise or fall.
    When quantity demanded equals quantity supplied, prices have no tendency to change
  • 41. The Graphical Interaction of Supply and Demand
  • 42. Excess supply
    A
    E
    C
    Excess demand
    The Graphical Interaction of Supply and Demand
    $5.00
    S
    4.00
    3.50
    3.00
    Price per DVD
    2.50
    2.00
    1.50
    D
    1.00
    1
    2
    3
    4
    5
    6
    7
    8
    9
    10
    11
    12
    Quantity of DVDs supplied and demanded
  • 43. The Graphical Interaction of Supply and Demand
    When price is $3.50 each, quantity supplied equals 7 and quantity demanded equals 3.
    • The excess supply of 4 pushes price down.
  • The Graphical Interaction of Supply and Demand
    When price is $1.50 each, quantity supplied equals 3 and quantity demanded equals 7.
    • The excess demand of 4 pushes price up.
  • The Graphical Interaction of Supply and Demand
    When price is $2.50 each, quantity supplied equals 5 and quantity demanded equals 5.
    • There is no excess supply or excess demand, so price will not rise or fall.
  • The Graphical Interaction of Supply and Demand
    When price is $2.50 each, quantity supplied equals 5 and quantity demanded equals 5.
    • There is no excess supply or excess demand, so price will not rise or fall.
  • Shifts in Supply and Demand
    Shifts in either supply or demand change equilibrium price and quantity.
  • 44. Increase in Demand
    An increase in demand creates excess demand at the original equilibrium price.
    The excess demand pushes price upward until a new higher price and quantity are reached.
  • 45. B
    Excess demand
    D1
    S0
    $2.50
    A
    Price (per DVDs)
    2.25
    D0
    0
    9
    8
    10
    Quantity of DVDs (per week)
    Increase in Demand
  • 46. The Effects of a Shiftof the Demand Curve
  • 47. Decrease in Supply
    A decrease in supply creates excess demand at the original equilibrium price.
    The excess demand pushes price upward until a new higher price and lower quantity are reached.
  • 48. Decrease in Supply
    S1
    C
    Excess demand
    B
    S0
    $2.50
    Price (per DVDs)
    A
    2.25
    D0
    0
    9
    8
    10
    Quantity of DVDs (per week)
  • 49. Government Set Prices
    Price Ceilings
    Shortages
    Rationing Problem
    Black Markets
    Rent Controls
    Price Floors
    Surpluses
  • 50. Price Ceiling
    • A maximum price that sellers may charge for a good, usually set by government.
    • 51. Excess Demand (Shortage) Created by a Price Ceiling
  • Price ceiling
    Price Rationing :The process by which the market system allocates goods and services to consumers when quantity demanded exceeds quantity supplied.
    Ration coupons Tickets or coupons that entitle individuals to purchase a certain amount of a given product per month.
    Black market A market in which illegal trading takes place at market-determined prices.
  • 52.
    • PRICE FLOORS
    • 53. Price floor A minimum price below which exchange is not permitted.
    • 54. Minimum wage A price floor set under the price of labor.
    • 55. Agricultural Products
  • E n d