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Laws of supply__demand_equilibrium
 

Laws of supply__demand_equilibrium

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    Laws of supply__demand_equilibrium Laws of supply__demand_equilibrium Presentation Transcript

    • SUPPLY AND DEMAND: HOW MARKETS WORK
    • MARKETS AND COMPETITION • A market is a group of buyers and sellers of a particular good or service.
    • MARKETS AND COMPETITION • Buyers determine demand. • Sellers determine supply
    • DEMAND • Quantity demanded : the amount of a good that buyers are willing and able to purchase. • Law of Demand • The quantity demanded of a good falls when the price of the good rises. # $ Demanded
    • Cat’s Demand Schedule
    • Cat’s Demand Curve Price of Ice-Cream Cone $3.00 2.50 1. A decrease in price ... 2.00 1.50 1.00 0.50 0 1 2 3 4 5 6 7 8 9 10 11 12 Quantity of Ice-Cream Cones 2. ... increases quantity of cones demanded.
    • Change in Quantity Demanded • Change in Quantity Demanded • Movement along the demand curve. • Caused by a change in the price of the product.
    • Change in Quantity Demanded Price of IceCream Cones B $2.0 0 A tax that raises the price of ice-cream cones results in a movement along the demand curve. A 1.00 D 0 4 8 Quantity of Ice-Cream Cones
    • SUPPLY • Quantity supplied is the amount of a good that sellers are willing and able to sell. • Law of Supply • The quantity supplied of a good rises when the price of the good rises. # supplied $
    • Ben’s Supply Schedule Price of Ice cream cone Qty. of Cones supplied
    • Ben’s Supply Curve Price of Ice-Cream Cone $3.00 1. An increase in price... 2.50 2.00 1.50 1.00 0.50 0 1 2 3 4 5 6 7 8 9 10 11 12 Quantity of Ice-Cream Cones 2. ... increases quantity of cones.
    • Change in Quantity Supplied • Change in Quantity Supplied • Movement along the supply curve. • Caused by a change in the price of the product.
    • Change in Quantity Supplied Price C $3.0 0 A rise in the price of ice cream cones results in a movement along the supply curve. A 1.00 0 S 1 5 Quantity of Ice-Cream Cones
    • $ QD QS 200 24 300 16 10 400 10 16 500 4 22 600 0 Airline 1 25 Tickets 600 S Price $ 500 400 350 300 200 D 100 0 0 2 4 6 8 10 121314 Quantity # 16 18 22 24 26 28
    • SUPPLY AND DEMAND TOGETHER Equilibrium Qs= Qd Law of Supply and Demand: The price of any good adjusts to bring the quantity supplied and the quantity demanded for that good into balance.
    • SUPPLY AND DEMAND TOGETHER Demand Schedule Supply Schedule At $2.00, the quantity demanded is equal to the quantity supplied!
    • The Equilibrium of Supply and Demand Price of Ice-Cream Cone Supply Equilibrium Equilibrium price $2.00 Equilibrium quantity 0 1 2 3 4 5 6 7 8 Demand 9 10 11 12 13 Quantity of Ice-Cream Cones
    • If the price is too high (Qs > Qd)… Price of Ice-Cream Cone The Price Will Drop! Supply $3.00 $2.00 Quantity Supplied Quantity Demanded 0 1 2 3 4 5 6 7 8 9 Demand 10 11 12 13 Quantity of Ice-Cream Cones
    • If the price is too low (Qd > Qs)… Price of Ice-Cream Cone The Price Will Rise! Supply $2.00 $1.00 Demand Quantity Demanded Quantity Supplied 0 1 2 3 4 5 6 7 8 9 10 11 12 13 Quantity of Ice-Cream Cones