2. Supply and Demand Model
- A Competitive Market
Assumptions:
To began analyzing the model and to make it work, we assume a few assumptions in place first:
- Rational Thinking
- Ceteris Paribus - A Latin word for – “All else being the same”
在其他条件不变的情况下
3. - A Competitive Market
Assumptions:
To began analyzing the model and to make it work, we assume a few assumptions in place first:
- Rational Thinking
- Ceteris Paribus It’s important to note, that things are
Supplied based on the price but also
for other reasons, just like with
Demand
Key point:
Supply and Demand Model
10. Supply and Demand Model
Supply
- The amount of any good, service, or resource that
people are willing and able to sell during a specified
period at a specified price.
现在卖，在这个价位
Quantity
Supplied
The law of
Supply
Ceteris Paribus, (all other things staying the same)
If the price of a good rises, the quantity supplied increases.
If the price of a good falls, the quantity supplied decreases.
- Ceteris Paribus, the relationship between the
quantity sold and the price of a good.你会卖多少，
在一个给定的的价格
+
=
11. Ceteris Paribus, (all other things staying the same)
If the price of a good rises, the quantity supplied increases.
If the price of a good falls, the quantity supplied decreases.
Prices Quantity supplied
Prices Quantity supplied
This is a movement along the supply curve and does not
change where the supply curve is
The law of
Supply
Supply and Demand Model
12. SUPPLY
Quantity of coffee beans
(billions of pounds)
Price of
coffee
beans
(per
pound)
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.
Supply
curve, S
Supply Schedule for
Coffee Beans
Price of
coffee beans
(per pound)
Quantity of
coffee beans
supplied
(billions of
pounds)
$2.00 11.6
1.75 11.5
1.50 11.2
1.25 10.7
1.00 10.0
0.75 9.1
0.50 8.0
13. Changes in Supply without the price changing
Shift Left
Shift Right
SUPPLY (shifts)
This is a shift of the supply curve itself at any
given price
= Less Supply at the same price
= More Supply at the same price
14. 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.
Movement Along the Supply Curve
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 of coffee
beans (per
pound)
Quantity of coffee beans
(billions of pounds)
… is not the
same thing as
a shift of the
supply curve
A movement
along the supply
curve…
15. Changes (shifts) in SUPPLY
(NOT quantity supplied)
1.) Number of Sellers
2.) Price of Resources or Inputs
3.) Prices of Related Goods
i) Substitute in Production
ii) Compliment in Production
4.) Productivity
5.) Expectations
The short answer is:
Everything else that is
NOT due to a change
in price!
5 main reasons:
16. More sellers = more Supply at every given price
Less sellers = less Supply at every given price
Changes (shifts) in SUPPLY
1.) Number of Sellers
19. Changes (shifts) in SUPPLY
1.) Number of Sellers
2.) Number of Resources
or Inputs
Resource and input prices influence the
cost of production.
The more it costs to produce, less is
supplied
The less it costs to produce, more is
supplied
20. Changes (shifts) in SUPPLY
1.) Number of Sellers
2.) Number of Resources
or Inputs
Example: Ceteris Paribus
If you pay more Taxes…
= Less profit
= Less supply
21. PAY MORE TAXES
= An Input cost so it
is more expensive
to produce the
same thing so you
produce less.
Shifts of the Supply Curve
S
2
S
1
Price
Quantity
Decrease in
supply
22. Changes (shifts) in SUPPLY
1.) Number of Sellers
2.) Number of Resources
or Inputs
Example: Ceteris Paribus
If your input prices go up…
= Less profit
=Less supply
23. Paying more for apples to sell
S
3
S
1
Price
Quantity
Decrease in
supply
24. Changes (shifts) in SUPPLY
1.) Number of Sellers
2.) Number of Resources
or Inputs
Example:
Ceteris Paribus
If I make iphones and I used to pay the
man and now I pay the woman less
money…
= more profit for me
= more supply I am willing to do
26. Changes (shifts) in SUPPLY
1.) Number of Sellers
2.) Number of Resources
or Inputs
Example:
Ceteris Paribus
If I make iphones and now the workers
protest for higher wages and now I
have to pay this woman more money…
= Less profit for me
= Less supply I am willing to do
30. Changes (shifts) in SUPPLY
1.) Number of Sellers
2.) Number of Resources or Inputs
3.) Price of Related Goods
i.) Substitute in Production
生产的替代品
A good that can be consumed in place of
another good using the same resources
to make either one.
Supply increases, if price of its substitutes in production falls.
Supply decreases, if price of its substitutes in production rises.
31. Supply of this
goes up The price of this falls
IF…
Supply of this goes
down
The price of this goes up
IF…
i.) Substitute in Production
34. Changes (shifts) in SUPPLY
1.) Number of Sellers
2.) Number of Resources or Inputs
3.) Price of Related Goods
i.) Substitute in Production
ii.) Complement in Production
生产，补
A good that is produced along with another
good.
Supply increases, if price of its complements in production rises.
Supply decreases if price of its complements in production falls.
35. Supply of this
goes up
The price of this goes up
IF…
Supply of this
goes down
The price of this goes down
IF…
i.) Substitute in Production
36. Milk Demand is up
You are a farmer
producing cows for
milk production…
37. Milk Demand is up
Now produce more
cows to make more
milk. (can lead to
more beef production)
38. Changes (shifts) in SUPPLY
1.) Number of Sellers
2.) Number of Resources or Inputs
3.) Price of Related Goods
4.) Productivity生产力 - Productivity is output per unit of input.
- An increase in productivity lowers
costs and increases supply.
Example;
- an advance in technology increases supply
possibilities.
- or decrease in productivity raises costs and
decreases supply.
42. Changes (shifts) in SUPPLY
1.) Number of Sellers
2.) Number of Resources or Inputs
3.) Price of Related Goods
4.) Productivity
5.) Expectations 期望 - Expectations about future prices
influence supply.
- Expectations of future input prices
also influence supply.
49. Changes (shifts) in SUPPLY
(NOT quantity supplied)
1.) Number of Sellers
2.) Price of Resources or Inputs
3.) Prices of Related Goods
i) Substitute in Production
ii) Compliment in Production
4.) Productivity
5.) Expectations
The short answer is:
Everything else that is
NOT due to a change
in price!
5 main reasons:
50. Individual Supply All of these factors are related to individual
supply of stuff.
We want to also look at markets as a whole
of many suppliers.
We have seen so far that number of sellers
is related to changes in supply.
Supply and Demand Model
51. Individual Supply
The sum of the supply of all the sellers in a
market.
Add up each seller’s Individual Supply = Market
Supply
Market Supply
Supply and Demand Model
54. Supply and Demand Model
- A Competitive Market
Assumptions:
To began analyzing the model and to make it work, we assume a few assumptions in place first:
- Rational Thinking
- Ceteris Paribus - A Latin word for – “All else being the same”
在其他条件不变的情况下
55. Supply and Demand Model
Supply
- The amount of any good, service, or resource that
people are willing and able to sell during a specified
period at a specified price.
现在卖，在这个价位
Quantity
Supplied
The law of
Supply
Ceteris Paribus, (all other things staying the same)
If the price of a good rises, the quantity supplied increases.
If the price of a good falls, the quantity supplied decreases.
- Ceteris Paribus, the relationship between the
quantity sold and the price of a good.你会卖多少，
在一个给定的的价格
+
=
56. Changes (shifts) in SUPPLY
(NOT quantity supplied)
1.) Number of Sellers
2.) Price of Resources or Inputs
3.) Prices of Related Goods
i) Substitute in Production
ii) Compliment in Production
4.) Productivity
5.) Expectations
The short answer is:
Everything else that is
NOT due to a change
in price!
5 main reasons:
