EE&FA/C - SHIFT IN DEMAND AND SUPPLY CURVES - FINAL YEAR CS/3RD YEAR IT - SRI SAIRAM INSTITUTE OF TECHNOLOGY, CHENNAI - Dr.K.BARANIDHARAN
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EE&FA/C - SHIFT IN DEMAND AND SUPPLY CURVES - FINAL YEAR CS/3RD YEAR IT - SRI SAIRAM INSTITUTE OF TECHNOLOGY, CHENNAI - Dr.K.BARANIDHARAN

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EE&FA/C - SHIFT IN DEMAND AND SUPPLY CURVES - FINAL YEAR CS/3RD YEAR IT - SRI SAIRAM INSTITUTE OF TECHNOLOGY, CHENNAI - Dr.K.BARANIDHARAN

EE&FA/C - SHIFT IN DEMAND AND SUPPLY CURVES - FINAL YEAR CS/3RD YEAR IT - SRI SAIRAM INSTITUTE OF TECHNOLOGY, CHENNAI - Dr.K.BARANIDHARAN

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EE&FA/C - SHIFT IN DEMAND AND SUPPLY CURVES - FINAL YEAR CS/3RD YEAR IT - SRI SAIRAM INSTITUTE OF TECHNOLOGY, CHENNAI - Dr.K.BARANIDHARAN EE&FA/C - SHIFT IN DEMAND AND SUPPLY CURVES - FINAL YEAR CS/3RD YEAR IT - SRI SAIRAM INSTITUTE OF TECHNOLOGY, CHENNAI - Dr.K.BARANIDHARAN Presentation Transcript

  • Engineering Economics & Financial Accounting Ee&fa 12 September 2013
  • Dr.K.Baranidharan Present by…
  • SHIFT IN DEMAND AND SUPPLY CURVES
  • 4 of 42 Supply Curve Quantity Price 70 9 11 1513 17 $2.00 1.75 1.50 1.25 1.00 0.75 0.50 As price rises, the quantity supplied rises. A supply curve shows graphically how much of a good or service people are willing to sell at any given price. Supply curve, S
  • 5 of 42 An Increase in Supply A shift of the supply curve is a change in the quantity supplied of a good at any given price. 70 9 11 13 15 17 $2.00 1.75 1.50 1.25 1.00 0.75 0.50 S 1 S 2 Price of coffee beans (per pound) Quantity … is not the same thing as a shift of the supply curve A movement along the supply curve…
  • 6 of 42 Movement Along the Supply Curve A movement along the supply curve is a change in the quantity supplied of a good that is the result of a change in that good’s price. 70 10 11.2 12 15 17 $2.00 1.75 1.50 1.25 1.00 0.75 0.50 S 1 S 2 A C B Price Quantity … is not the same thing as a shift of the supply curve A movement along the supply curve…
  • 7 of 42 Any “increase in supply” means a rightward shift of the supply curve: at any given price, there is an increase in the quantity supplied. (S1 S2) Shifts of the Supply Curve S 3 S 1 S 2 Price Quantity Decrease in supply Increase in supply Any “decrease in supply” means a leftward shift of the supply curve: at any given price, there is a decrease in the quantity supplied. (S1 S3)
  • SHIFT IN DEMAND AND SUPPLY CURVES • Change in any of the variables, other than price, that influence demand or supply will result in a shift in the demand curve or the supply curve or both.
  • A rise in demand(shift in the curve to the right) • An increase in demand result in shortage of a commodity initially and existing equilibrium condition is distributed. • Unsatisfied buyers bid up the price and producers, lured by profitability, increase the supply. • A new equilibrium will be attained where more quantity will be exchanged at a higher price.
  • A fall in demand (shift in the demand curve to the left) •A degrease in demand leads to decrease in the equilibrium price as well as the equilibrium quantity exchanged.
  • A rise in supply (shift in the supply curve to the right) •An increase in supply results in a decrease in the equilibrium price and increase in the equilibrium quantity exchanged.
  • Changes in supply can result from events like the following: Change in production costs. Improved technology that makes production more efficient. Industry growth and shrinkage
  • (Economics) the economic condition in which there is neither excess demand nor excess supply in a market
  • A fall in supply (shift in the supply curve to the left) • A decrease in supply result in an increase in the equilibrium price and decrease in the equilibrium quantity exchanged.
  • Simultaneous changes in both supply and demand • There is decrease in the equilibrium price or an increase therein and/or a decrease in the equilibrium quantity or an increase therein depends on the extent of shift in the demand and supply curves.
  • 18 of 42 Simultaneous Shifts of Supply and Demand Two opposing forces determining the equilibrium quantity. The increase in demand dominates the decrease in supply. Quantity of coffeeQ2 Q 1 P 2 P 1 S 2 D 2 D 1 S 1 E 1 E 2 (a) One possible outcome: Price Rises, Quantity Rises Price of coffee Small decrease in supply Large increase in demand
  • 19 of 42 Simultaneous Shifts of Supply and Demand Two opposing forces determining the equilibrium quantity. Q 1 Q 2 P 2 P 1 S 2 D 2 D 1 S 1 E 1 E 2 (b) Another Possibility Outcome: Price Rises, Quantity Falls Price of coffee Quantity of coffee Large decrease in supply Small increase in demand
  • 20 of 42 Supply, Demand and Equilibrium  Equilibrium in a competitive market: when the quantity demanded of a good equals the quantity supplied of that good.  The price at which this takes place is the equilibrium price (a.k.a. market-clearing price):  Every buyer finds a seller and vice versa.  The quantity of the good bought and sold at that price is the equilibrium quantity.
  • 21 of 42 Market equilibrium occurs at point E, where the supply curve and the demand curve intersect. Price Quantity 70 10 1513 17 $2.00 1.75 1.50 1.25 1.00 0.75 0.50 Supply Demand E EquilibriumEquilibrium price Equilibrium quantity Market Equilibrium
  • 22 of 42 There is a surplus of a good when the quantity supplied exceeds the quantity demanded. Surpluses occur when the price is above its equilibrium level. 70 10 1513 17 $2.00 1.75 1.50 1.25 1.00 0.75 0.50 Supply Demand 8.1 11.2 E Surplus Quantity demanded Quantity supplied Price Quantity Surplus
  • 23 of 42 70 10 1513 17 $2.00 1.75 1.50 1.25 1.00 0.75 0.50 Supply Demand 9.1 11.5 E Shortage Quantity demanded Quantity supplied Price Quantity There is a shortage of a good when the quantity demanded exceeds the quantity supplied. Shortages occur when the price is below its equilibrium level. Shortage
  • Dr.K.Baranidharan THANK YOU