The document discusses the interaction of supply and demand in microeconomics. It outlines factors that can shift the supply curve or demand curve, such as income levels, prices of related goods, and technological changes. It also explains how market equilibrium is reached at the price where the quantity demanded equals the quantity supplied. Examples are provided to illustrate the impacts of changes in supply or demand on the market price and quantity.

1. Microeconomics
Lecture 6
The Interaction of
Demand and Supply

2. Shift Demand
Income
Prices of Related Goods
Tastes
Population & Demographics
Expected Future Prices

3. Shift Supply
Prices of inputs
Technological change
Price of substitutes in production
Number of firms in the market
Expected Future Prices

4. Market Equilibrium
Where
quantity supplied
equals
quantity demanded

5. $100
$90
S1
$80
$70
$60
Price
$50
$40
$30
$20
$10
D1
0
0 1 2 3 4 5 6 7 8 9 10
Quantity

6. $100
$90
S1
$80
$70
$60
Price
$50
$40
$30
$20
$10
D1
0
0 1 2 3 4 5 6 7 8 9 10
Quantity

7. 1. I get a raise at my job.
2. More people move to Riyadh.
3. A decrease in the price of a
substitute.
4. New innovation that reduces cost
5. Increase in the number of suppliers
6. Expect prices to go up tomorrow.

8. What will happen if a researcher
discovers that a vitamin in dates
protects against cancer and there
is also an insect that destroys
part of the date palm orchard?

9. $100
$90
S1
$80
$70
$60
Price
$50
$40
$30
$20
$10
D1
0
0 1 2 3 4 5 6 7 8 9 10
Quantity

10. $100
$90
S1
$80
$70
$60
Price
$50
$40
$30
$20
$10
D1
0
0 1 2 3 4 5 6 7 8 9 10
Quantity

11. $100
$90
S1
$80
$70
$60
Price
$50
Maximum
$40
Price
$30
$20
$10
D1
0
0 1 2 3 4 5 6 7 8 9 10
Quantity

12. $100
$90
Demand 6
Supply 4
S1
$80
Shortage 2
$70
$60
Price
$50
Maximum
$40
Price
$30
$20
$10
D1
0
0 1 2 3 4 5 6 7 8 9 10
Quantity

13. $100
$90
Demand 4
Supply 6
S1
$80
Surplus 2
$70
Minimum
$60
Price
Price
$50
$40
$30
$20
$10
D1
0
0 1 2 3 4 5 6 7 8 9 10
Quantity