Demand and supply

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What Happen to Price and Quantity When Supply and Demand Change?

What Happen to Price and Quantity When Supply and Demand Change?

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  • 1. Mr. Rey Belen
  • 2.
    • The Quantity Demanded of any good is the amount of the good that buyers are willing and able to purchase.
    • Law of Demand: the claim that the quantity demanded of a good falls when the price of the good rises, other things equal.
  • 3.  
  • 4.
    • Variable A change in this variable
    • Own Price …causes a movement
    • along the D curve
    • # of buyers …shifts the D curve
    • (Normal vs. Inferior)
    • Income …shifts the D curve
    • Price of
    • related goods …shifts the D curve
    • (Substitutes vs. Complements)
    • Tastes …shifts the D curve
    • Expectations …shifts the D curve
  • 5.
    • The Quantity Supplied of any goods is the amount that sellers are willing and able to sell.
    • Law of Supply: the claim that the quantity supplied of a good rises when the price of the goods rises, other things equal.
  • 6.  
  • 7.
    • Variable A change in this variable
    • Own Price …causes a movement
    • along the S curve
    • Input Prices …shifts the S curve
    • (minimum wage increase)
    • Technology …shifts the S curve
    • # of Sellers …shifts the S curve
    • Expectations …shifts the D curve
  • 8. PRICE QUANTITY D S Equilibrium: P has reached the level where quantity supplied equals quantity demanded
  • 9. PRICE QUANTITY D S When quantity supplied is greater than quantity demanded SURPLUS
  • 10. PRICE QUANTITY D S When quantity demanded is greater than quantity supplied SHORTAGE
  • 11.
    • To determine the effects of any event,
    • Decide whether event shift S curve, D curve, or both.
    • Decide in which direction curve shifts.
    • Use supply-demand diagram to see how the shift changes eq’m P and Q .
  • 12. PRICE OF DIESEL CARS QUANTITY OF DIESEL CARS D1 S1 Analyze the effect of: -Increase in price of gas -New technology reduces cost of producing diesel cars P1 Q1
  • 13. D1 S1 Event to be analyze: -Increase in price of gas P1 Q1 Step 1: D curve shifts to the right The shift causes an increase in price and quantity of diesel cars P2 D2 Q2 PRICE OF DIESEL CARS QUANTITY OF DIESEL CARS
  • 14. D1 S1 Event to be analyze: -New technology reduces cost of producing diesel cars. P1 Q1 Step 1: S curve shifts to the right The shift causes price to fall and quantity to rise P2 Q2 S2 PRICE OF DIESEL CARS QUANTITY OF DIESEL CARS
  • 15. D1 S1 P1 Q1 P2 D2 Q2 S2 PRICE OF DIESEL CARS QUANTITY OF DIESEL CARS
  • 16. D1 S1 P1 Q1 P2 D2 Q2 S2 PRICE OF DIESEL CARS QUANTITY OF DIESEL CARS
  • 17.  
  • 18. No Change in Supply An Increase in Supply A Decrease in Supply No Change in Demand P same Q same P down Q up P up Q down An Increase in Demand P up Q up P ambiguous Q up P up Q ambiguous A Decrease in Demand P down Q down P down Q ambiguous P ambiguous Q down
  • 19. PRICE QUANTITY D1 S1 P1 Q1