This document provides an overview of demand and supply concepts:
1) It defines demand as the quantity of a product consumers wish to purchase based on price and other factors, and explains how individual demand curves aggregate to form market demand.
2) Supply is defined as the quantity producers wish to sell based on factors like costs of production.
3) The interaction of demand and supply forces in markets determines the market price through the forces of demand seeking to purchase more at lower prices and supply seeking to sell more at higher prices.
4) Shifts in demand or supply curves can occur due to changes in the underlying determinants, resulting in changes to market equilibrium price and quantity.
This document discusses key concepts related to supply and demand, including:
1) It defines supply and demand curves, and how they relate quantity supplied/demanded to price.
2) It explains how equilibrium price and quantity are determined by the intersection of supply and demand.
3) It discusses factors that can cause supply and demand curves to shift, leading to new equilibrium prices and quantities.
4) It introduces concepts of price elasticities of supply and demand.
The Market Of Supply and Demand - EconomicsFaHaD .H. NooR
- Supply and demand determine market equilibrium price and quantity in competitive markets. The demand curve shows the relationship between price and quantity demanded, while the supply curve shows the relationship between price and quantity supplied.
- Equilibrium occurs where the supply and demand curves intersect, with price and quantity at the equilibrium point balancing the quantity suppliers are willing to offer and buyers are willing to purchase.
- Changes in supply or demand shift the curves, impacting equilibrium price and quantity. A demand increase raises price and quantity while a supply decrease also raises price but lowers quantity.
Inflation is a sustained increase in the general price level or cost of living in an economy. The UK government targets an inflation rate of 2% as measured by the Consumer Price Index (CPI). The Bank of England sets interest rates to control inflationary pressures and meet this target. High inflation can cause problems like inequality, falling real incomes, and higher borrowing costs. Some key causes of inflation include rising costs of production, excess demand in the economy, and external factors like increases in commodity prices or a weaker currency.
The document discusses concepts of elasticity in microeconomics including price elasticity of demand, cross-price elasticity, and income elasticity. It provides formulas for calculating different elasticities and benchmarks for determining whether something is elastic or inelastic. Examples are given to demonstrate calculating the price elasticity of demand using the midpoint formula to analyze responses to price changes.
Demand, supply, and market equilibrium are analyzed. Demand is defined as the relationship between price and quantity demanded while supply is defined as the relationship between price and quantity supplied. The law of demand and law of supply state that quantity demanded increases with lower prices and quantity supplied increases with higher prices, respectively. Market equilibrium occurs when quantity demanded equals quantity supplied at the equilibrium price. Changes in demand or supply curves result in new equilibrium prices and quantities.
This paper develops an equilibrium model of the determination of exchange rates and prices of goods. Changes in relative prices due to supply or demand shifts induce changes in exchange rates and deviations from purchasing power parity. These changes may create a correlation between the exchange rate and the terms of trade, but this correlation cannot be exploited by governments to affect the terms of trade through foreign exchange market operations. The model emphasizes the role of relative price changes due to real disturbances and how these changes affect both exchange rates and the terms of trade through shifts in supply and demand. Government interventions in foreign exchange markets cannot influence exchange rates if the relationship between exchange rates and terms of trade is due to shifts in real supply and demand for domestic and foreign goods.
This document discusses key concepts related to supply and demand, including:
1) It defines supply and demand curves, and how they relate quantity supplied/demanded to price.
2) It explains how equilibrium price and quantity are determined by the intersection of supply and demand.
3) It discusses factors that can cause supply and demand curves to shift, leading to new equilibrium prices and quantities.
4) It introduces concepts of price elasticities of supply and demand.
The Market Of Supply and Demand - EconomicsFaHaD .H. NooR
- Supply and demand determine market equilibrium price and quantity in competitive markets. The demand curve shows the relationship between price and quantity demanded, while the supply curve shows the relationship between price and quantity supplied.
- Equilibrium occurs where the supply and demand curves intersect, with price and quantity at the equilibrium point balancing the quantity suppliers are willing to offer and buyers are willing to purchase.
- Changes in supply or demand shift the curves, impacting equilibrium price and quantity. A demand increase raises price and quantity while a supply decrease also raises price but lowers quantity.
Inflation is a sustained increase in the general price level or cost of living in an economy. The UK government targets an inflation rate of 2% as measured by the Consumer Price Index (CPI). The Bank of England sets interest rates to control inflationary pressures and meet this target. High inflation can cause problems like inequality, falling real incomes, and higher borrowing costs. Some key causes of inflation include rising costs of production, excess demand in the economy, and external factors like increases in commodity prices or a weaker currency.
The document discusses concepts of elasticity in microeconomics including price elasticity of demand, cross-price elasticity, and income elasticity. It provides formulas for calculating different elasticities and benchmarks for determining whether something is elastic or inelastic. Examples are given to demonstrate calculating the price elasticity of demand using the midpoint formula to analyze responses to price changes.
Demand, supply, and market equilibrium are analyzed. Demand is defined as the relationship between price and quantity demanded while supply is defined as the relationship between price and quantity supplied. The law of demand and law of supply state that quantity demanded increases with lower prices and quantity supplied increases with higher prices, respectively. Market equilibrium occurs when quantity demanded equals quantity supplied at the equilibrium price. Changes in demand or supply curves result in new equilibrium prices and quantities.
This paper develops an equilibrium model of the determination of exchange rates and prices of goods. Changes in relative prices due to supply or demand shifts induce changes in exchange rates and deviations from purchasing power parity. These changes may create a correlation between the exchange rate and the terms of trade, but this correlation cannot be exploited by governments to affect the terms of trade through foreign exchange market operations. The model emphasizes the role of relative price changes due to real disturbances and how these changes affect both exchange rates and the terms of trade through shifts in supply and demand. Government interventions in foreign exchange markets cannot influence exchange rates if the relationship between exchange rates and terms of trade is due to shifts in real supply and demand for domestic and foreign goods.
Demand and Supply Analysis (Economics) Lecture NotesFellowBuddy.com
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This document provides an overview of supply and demand concepts including:
1) It defines demand as the desire, ability, and willingness of consumers to purchase a product, and explains how demand is a microeconomic concept.
2) It introduces the law of demand and explains how quantity demanded varies inversely with price. Graphs of demand schedules and curves are also presented.
3) The document then discusses factors that can cause a change in quantity demanded versus a change in demand, using examples.
4) Similar concepts of supply, including the law of supply and factors that can cause a change in quantity supplied or change in supply, are then covered.
This document provides an overview of market equilibrium and how it is impacted by shifts in supply and demand. It defines key economic concepts such as markets, demand and supply curves, equilibrium price and quantity, surplus and shortage. It then explains how equilibrium is impacted by changes in demand and supply, both independently and simultaneously. Special cases involving perfectly inelastic or elastic demand and supply are covered. The document also discusses consumer surplus, producer surplus, total surplus, and how government intervention through price controls can impact equilibrium and result in deadweight loss. Market failures from externalities and ways to internalize externalities are explained.
This document discusses price controls and their impact on supply and demand. It provides examples of price ceilings, which establish a legal maximum price, and price floors, which set a legal minimum price. Price ceilings can cause shortages by creating a surplus of demand over supply. Price floors can result in surpluses or unemployment by producing a surplus of supply over demand. The effects are illustrated using supply and demand graphs for rental housing prices under a price ceiling and wages for unskilled labor under a minimum wage price floor.
Elasticity measures the responsiveness of quantity to price changes. It allows economists to compare markets without standardizing units. There are own price elasticities of demand and supply that measure responsiveness of quantity to the good's own price. Demand is more price sensitive when elasticity is further from zero. Total expenditures can increase or decrease with price changes depending on elasticity. Other elasticities include cross price and income elasticities.
Demand,supply,Demand and supply,equilibrium between demand and supply Anand Nandani
The document discusses concepts related to demand and supply, including:
1. Demand curves show the relationship between price and quantity demanded, while supply curves show the relationship between price and quantity supplied.
2. The intersection of the demand and supply curves determines the equilibrium price and quantity in a market.
3. Elasticity measures the responsiveness of demand or supply to various factors like price, income, and price of related goods. It helps to determine how demand and supply respond to changes in the market.
This document summarizes key concepts related to money, interest rates, and exchange rates. It discusses what money is, how the money supply is controlled by central banks, and factors that influence the demand for money, including interest rates, prices, and income. A model of aggregate money demand is presented showing the relationship between real money demand, interest rates, and income. The interaction of money supply and demand in the money market is explained, along with how changes in the money supply or national income affect interest rates. Finally, the connection between the domestic money market and foreign exchange market is described.
This document discusses key concepts related to demand and supply, including:
1) Demand and supply schedules show the relationship between price and quantity at different price levels. Demand and supply curves graph this relationship.
2) A change in a non-price factor like income causes a shift of the demand or supply curve, while a price change results in movement along the curve.
3) Equilibrium occurs where quantity demanded equals quantity supplied. Price controls can result in surpluses or shortages from the equilibrium.
4) Elasticity measures the responsiveness of one variable to changes in another. It is used to analyze how changes in price or other factors affect revenue and consumer behavior.
This document discusses inflation, its causes and methods for controlling it. It defines inflation as a general rise in prices over time which reduces purchasing power. Inflation is inversely related to unemployment and hurts investors. It is measured by price indices like the wholesale price index (WPI) and consumer price index (CPI). Causes include demand-pull, cost-push, and built-in inflation. Controlling inflation requires coordinated monetary policy like interest rate changes and fiscal policy like tax increases. Extreme, hyperinflation has devastated Zimbabwe's economy.
This document summarizes key concepts related to demand and supply analysis. It defines demand as the willingness and ability of consumers to purchase a good at a given price. The market demand curve is the horizontal summation of individual demand curves. Supply is defined as the quantity producers are willing to provide at a given price. Equilibrium price is reached where the demand and supply curves intersect, indicating the price at which quantity demanded equals quantity supplied. The summary discusses how shifts in demand or supply curves affect equilibrium price and quantity.
This document discusses supply and the supply curve. It defines supply as the quantity of a good sellers are willing and able to sell. A supply curve shows the relationship between price and quantity supplied, with quantity supplied increasing as price increases. The law of supply states there is a direct relationship between price and quantity supplied. A shift in the supply curve occurs when a determinant of supply changes, such as input prices or technology, while movement along the curve shows changes in quantity supplied due to price changes. The document also discusses market supply, determinants of supply, and how equilibrium price and quantity are affected by changes in demand and supply.
Elasticity measures how responsive buyers and sellers are to changes in market conditions like price and income. Price elasticity of demand is the percentage change in quantity demanded divided by the percentage change in price. Price elasticity of supply is the percentage change in quantity supplied divided by the percentage change in price. Elasticity analysis can be used to determine how changes in supply or demand will impact market equilibrium and total revenue.
This document discusses open economy macroeconomics concepts including the roles of net exports, capital flows, and trade balances. It covers how interest rates are determined in closed versus open economies and how fiscal and investment policies at home and abroad can influence real exchange rates. Graphs and equations are presented showing how real exchange rates are determined and how policies can impact them. Contact information is also provided for the United World campus locations in Ahmedabad and Kolkata, India.
This document discusses inflation in the Indian economy. It defines inflation as a rise in the general price level and a fall in the purchasing power of money. There are two main types of inflation - demand-pull inflation, which occurs when demand exceeds supply, and cost-push inflation, which is caused by increased production costs. The consequences of inflation include uncertainty, reduced savings and investment, and income redistribution. To control inflation, the government uses fiscal measures like taxes, monetary measures like interest rates, and general measures like wage and price controls. Empirical data shows India's inflation rate was 5.96% in March 2013 according to the wholesale price index.
This document discusses basic economic concepts related to demand, supply, and market equilibrium. It defines key terms including firms, households, entrepreneurs, factors of production, and the circular flow of inputs and outputs. It explains the laws of demand and supply, how demand and supply curves illustrate the relationship between price and quantity, and how equilibrium is reached when quantity demanded equals quantity supplied. Determinants of demand and supply are also outlined.
This document provides an introduction to demand and supply, including key concepts such as:
- Markets connect buyers and sellers of goods and services. Common types of markets include goods, labor, and stock markets.
- Demand refers to how much of a good or service consumers are willing and able to purchase at different prices. The demand curve slopes downward, as consumers demand more of a good at lower prices. Changes in factors like income can shift the demand curve.
- Supply refers to how much of a good or service producers are willing to provide at different prices. The supply curve slopes upward, as producers supply more of a good at higher prices. Changes in costs and other factors can shift the supply curve
The document discusses the budget constraint and optimal consumer choice. It begins by explaining the budget constraint conceptually and mathematically, showing how a consumer's income and the prices of goods determine which bundles of goods are affordable. It then shows how consumers can determine their optimal bundle by finding the point where an indifference curve is tangent to the budget constraint. This ensures the marginal rate of substitution between goods equals the relative price ratio. Finally, it explains how changes in prices or income can be decomposed into substitution and income effects, with substitution effects occurring when relative prices change and income effects when real income changes.
The document discusses foreign exchange markets, including the types of transactions that occur, participants, and how exchange rates are determined. It covers the functions of foreign exchange markets in facilitating international trade and investments. Exchange rates can be fixed or floating. India moved to a dual exchange rate system in 1992 that allowed partial convertibility of the rupee, with some transactions occurring at the market rate and others at an official rate, in order to make foreign exchange available for essential imports. Full convertibility was later introduced.
This chapter discusses supply and demand analysis including the market mechanism. It covers the supply and demand curves, how equilibrium is determined by the intersection of the curves, and how shifts in the curves from changes in supply and demand factors affect equilibrium price and quantity. It also discusses elasticities including price elasticity of demand and supply, income elasticity of demand, and cross elasticity of demand. Examples are provided on the price of eggs and college education to illustrate how equilibrium changes over time with shifts in supply and demand.
This document defines key economic concepts related to demand, including:
1. Demand is defined as consumer desire and ability to purchase goods and services, and is the driving force behind economic growth.
2. The law of demand states that as price increases, quantity demanded decreases, and vice versa.
3. Supply is defined as the willingness and ability of producers to provide goods and services to the market. The law of supply states that as price increases, quantity supplied increases as well.
4. Elasticity measures the responsiveness of one variable to changes in another, and is calculated for price, income, and cross elasticity. Demand can be elastic or inelastic depending on the degree of responsiveness to price
Demand and Supply Analysis (Economics) Lecture NotesFellowBuddy.com
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We connect Students who have an understanding of course material with Students who need help.
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# Students can catch up on notes they missed because of an absence.
# Underachievers can find peer developed notes that break down lecture and study material in a way that they can understand
# Students can earn better grades, save time and study effectively
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This document provides an overview of supply and demand concepts including:
1) It defines demand as the desire, ability, and willingness of consumers to purchase a product, and explains how demand is a microeconomic concept.
2) It introduces the law of demand and explains how quantity demanded varies inversely with price. Graphs of demand schedules and curves are also presented.
3) The document then discusses factors that can cause a change in quantity demanded versus a change in demand, using examples.
4) Similar concepts of supply, including the law of supply and factors that can cause a change in quantity supplied or change in supply, are then covered.
This document provides an overview of market equilibrium and how it is impacted by shifts in supply and demand. It defines key economic concepts such as markets, demand and supply curves, equilibrium price and quantity, surplus and shortage. It then explains how equilibrium is impacted by changes in demand and supply, both independently and simultaneously. Special cases involving perfectly inelastic or elastic demand and supply are covered. The document also discusses consumer surplus, producer surplus, total surplus, and how government intervention through price controls can impact equilibrium and result in deadweight loss. Market failures from externalities and ways to internalize externalities are explained.
This document discusses price controls and their impact on supply and demand. It provides examples of price ceilings, which establish a legal maximum price, and price floors, which set a legal minimum price. Price ceilings can cause shortages by creating a surplus of demand over supply. Price floors can result in surpluses or unemployment by producing a surplus of supply over demand. The effects are illustrated using supply and demand graphs for rental housing prices under a price ceiling and wages for unskilled labor under a minimum wage price floor.
Elasticity measures the responsiveness of quantity to price changes. It allows economists to compare markets without standardizing units. There are own price elasticities of demand and supply that measure responsiveness of quantity to the good's own price. Demand is more price sensitive when elasticity is further from zero. Total expenditures can increase or decrease with price changes depending on elasticity. Other elasticities include cross price and income elasticities.
Demand,supply,Demand and supply,equilibrium between demand and supply Anand Nandani
The document discusses concepts related to demand and supply, including:
1. Demand curves show the relationship between price and quantity demanded, while supply curves show the relationship between price and quantity supplied.
2. The intersection of the demand and supply curves determines the equilibrium price and quantity in a market.
3. Elasticity measures the responsiveness of demand or supply to various factors like price, income, and price of related goods. It helps to determine how demand and supply respond to changes in the market.
This document summarizes key concepts related to money, interest rates, and exchange rates. It discusses what money is, how the money supply is controlled by central banks, and factors that influence the demand for money, including interest rates, prices, and income. A model of aggregate money demand is presented showing the relationship between real money demand, interest rates, and income. The interaction of money supply and demand in the money market is explained, along with how changes in the money supply or national income affect interest rates. Finally, the connection between the domestic money market and foreign exchange market is described.
This document discusses key concepts related to demand and supply, including:
1) Demand and supply schedules show the relationship between price and quantity at different price levels. Demand and supply curves graph this relationship.
2) A change in a non-price factor like income causes a shift of the demand or supply curve, while a price change results in movement along the curve.
3) Equilibrium occurs where quantity demanded equals quantity supplied. Price controls can result in surpluses or shortages from the equilibrium.
4) Elasticity measures the responsiveness of one variable to changes in another. It is used to analyze how changes in price or other factors affect revenue and consumer behavior.
This document discusses inflation, its causes and methods for controlling it. It defines inflation as a general rise in prices over time which reduces purchasing power. Inflation is inversely related to unemployment and hurts investors. It is measured by price indices like the wholesale price index (WPI) and consumer price index (CPI). Causes include demand-pull, cost-push, and built-in inflation. Controlling inflation requires coordinated monetary policy like interest rate changes and fiscal policy like tax increases. Extreme, hyperinflation has devastated Zimbabwe's economy.
This document summarizes key concepts related to demand and supply analysis. It defines demand as the willingness and ability of consumers to purchase a good at a given price. The market demand curve is the horizontal summation of individual demand curves. Supply is defined as the quantity producers are willing to provide at a given price. Equilibrium price is reached where the demand and supply curves intersect, indicating the price at which quantity demanded equals quantity supplied. The summary discusses how shifts in demand or supply curves affect equilibrium price and quantity.
This document discusses supply and the supply curve. It defines supply as the quantity of a good sellers are willing and able to sell. A supply curve shows the relationship between price and quantity supplied, with quantity supplied increasing as price increases. The law of supply states there is a direct relationship between price and quantity supplied. A shift in the supply curve occurs when a determinant of supply changes, such as input prices or technology, while movement along the curve shows changes in quantity supplied due to price changes. The document also discusses market supply, determinants of supply, and how equilibrium price and quantity are affected by changes in demand and supply.
Elasticity measures how responsive buyers and sellers are to changes in market conditions like price and income. Price elasticity of demand is the percentage change in quantity demanded divided by the percentage change in price. Price elasticity of supply is the percentage change in quantity supplied divided by the percentage change in price. Elasticity analysis can be used to determine how changes in supply or demand will impact market equilibrium and total revenue.
This document discusses open economy macroeconomics concepts including the roles of net exports, capital flows, and trade balances. It covers how interest rates are determined in closed versus open economies and how fiscal and investment policies at home and abroad can influence real exchange rates. Graphs and equations are presented showing how real exchange rates are determined and how policies can impact them. Contact information is also provided for the United World campus locations in Ahmedabad and Kolkata, India.
This document discusses inflation in the Indian economy. It defines inflation as a rise in the general price level and a fall in the purchasing power of money. There are two main types of inflation - demand-pull inflation, which occurs when demand exceeds supply, and cost-push inflation, which is caused by increased production costs. The consequences of inflation include uncertainty, reduced savings and investment, and income redistribution. To control inflation, the government uses fiscal measures like taxes, monetary measures like interest rates, and general measures like wage and price controls. Empirical data shows India's inflation rate was 5.96% in March 2013 according to the wholesale price index.
This document discusses basic economic concepts related to demand, supply, and market equilibrium. It defines key terms including firms, households, entrepreneurs, factors of production, and the circular flow of inputs and outputs. It explains the laws of demand and supply, how demand and supply curves illustrate the relationship between price and quantity, and how equilibrium is reached when quantity demanded equals quantity supplied. Determinants of demand and supply are also outlined.
This document provides an introduction to demand and supply, including key concepts such as:
- Markets connect buyers and sellers of goods and services. Common types of markets include goods, labor, and stock markets.
- Demand refers to how much of a good or service consumers are willing and able to purchase at different prices. The demand curve slopes downward, as consumers demand more of a good at lower prices. Changes in factors like income can shift the demand curve.
- Supply refers to how much of a good or service producers are willing to provide at different prices. The supply curve slopes upward, as producers supply more of a good at higher prices. Changes in costs and other factors can shift the supply curve
The document discusses the budget constraint and optimal consumer choice. It begins by explaining the budget constraint conceptually and mathematically, showing how a consumer's income and the prices of goods determine which bundles of goods are affordable. It then shows how consumers can determine their optimal bundle by finding the point where an indifference curve is tangent to the budget constraint. This ensures the marginal rate of substitution between goods equals the relative price ratio. Finally, it explains how changes in prices or income can be decomposed into substitution and income effects, with substitution effects occurring when relative prices change and income effects when real income changes.
The document discusses foreign exchange markets, including the types of transactions that occur, participants, and how exchange rates are determined. It covers the functions of foreign exchange markets in facilitating international trade and investments. Exchange rates can be fixed or floating. India moved to a dual exchange rate system in 1992 that allowed partial convertibility of the rupee, with some transactions occurring at the market rate and others at an official rate, in order to make foreign exchange available for essential imports. Full convertibility was later introduced.
This chapter discusses supply and demand analysis including the market mechanism. It covers the supply and demand curves, how equilibrium is determined by the intersection of the curves, and how shifts in the curves from changes in supply and demand factors affect equilibrium price and quantity. It also discusses elasticities including price elasticity of demand and supply, income elasticity of demand, and cross elasticity of demand. Examples are provided on the price of eggs and college education to illustrate how equilibrium changes over time with shifts in supply and demand.
This document defines key economic concepts related to demand, including:
1. Demand is defined as consumer desire and ability to purchase goods and services, and is the driving force behind economic growth.
2. The law of demand states that as price increases, quantity demanded decreases, and vice versa.
3. Supply is defined as the willingness and ability of producers to provide goods and services to the market. The law of supply states that as price increases, quantity supplied increases as well.
4. Elasticity measures the responsiveness of one variable to changes in another, and is calculated for price, income, and cross elasticity. Demand can be elastic or inelastic depending on the degree of responsiveness to price
Their of Demand for business studies include :-
1) Meaning of Demand
2) Factors Affecting Demand
3) Determinants of Demand
4) Types of Demand
5) Law of Demand
6) Demand Scheduled
7) Market Demand Scheduled
8) Demand Curve
9) Shift in Demand Curve
10) Exception To The Law of Demand
11)
12)
2. Macro Economics..demand & supplyVIKAS SHARMA
The document discusses the economic concepts of supply and demand. It defines supply and demand as the forces that determine price and quantity in a market. Supply refers to the amount sellers are willing to offer at different prices, while demand refers to the amount buyers are willing to purchase. The relationship between price and quantity supplied/demanded is shown through supply/demand schedules and curves. Equilibrium occurs when quantity supplied equals quantity demanded at the equilibrium price. The document outlines various factors that can cause shifts in supply or demand curves and discusses how such shifts impact the equilibrium price and quantity.
The document summarizes the economic concepts of supply and demand. It defines supply and demand as the forces that determine price and quantity in a market. The relationship between each is shown via supply and demand curves - demand curves slope downward while supply curves slope upward. Equilibrium occurs where supply and demand are equal, establishing a market clearing price and quantity. Changes in determinants like income, input costs, or expectations can cause the curves to shift and disrupt equilibrium.
The document discusses supply and demand fundamentals including:
1. It defines supply and demand as the amounts that consumers are willing/able to buy (demand) and that producers are willing/able to sell (supply) at various prices.
2. The law of demand and law of supply state that demand is inversely related to price while supply is directly related.
3. Equilibrium occurs when quantity demanded equals quantity supplied at the equilibrium price.
4. Disequilibrium can occur in the form of shortages when price is below equilibrium or surpluses when price is above. The market works to move back to equilibrium.
The document discusses supply and demand. It defines demand as the quantity consumers are willing and able to purchase at different prices. The law of demand states that quantity demanded increases when price decreases. Demand can shift due to factors like income, tastes, or prices of substitutes. Supply is defined as the quantity producers are willing to supply at different prices. The law of supply states that quantity supplied increases when price increases. Supply can shift due to costs of production, number of producers, or technology. Equilibrium occurs where quantity supplied equals quantity demanded. Disequilibrium results in shortages or surpluses which push prices toward the equilibrium level.
This document provides a summary of key concepts in economics, including:
1) Firms produce goods and services while households consume them in the circular flow of economic activity.
2) Demand and supply determine market equilibrium price and quantity through interactions in product and input markets.
3) Consumer demand is influenced by price, income, wealth, tastes and expectations, while firm supply depends on price and costs.
4) Utility maximization theory explains that rational consumers seek to maximize satisfaction within their budget constraints.
This document provides a summary of key concepts in economics, including:
1) Firms produce goods and services while households consume them in the circular flow of economic activity.
2) Demand and supply determine market equilibrium price and quantity through interactions in product and input markets.
3) Consumer demand is influenced by price, income, wealth, tastes and expectations, while firm supply depends on price and costs.
4) Utility maximization theory explains that rational consumers seek to maximize satisfaction subject to their budget constraint.
Firms produce goods and services, which are sold in output markets to households. Households supply resources like labor in input markets to firms. Market equilibrium exists where quantity supplied equals quantity demanded, resulting in no incentive for prices to change. A change in demand or supply can shift the curves, impacting equilibrium price and quantity. Higher demand increases price and quantity while higher supply decreases price but increases quantity at the new equilibrium.
The document discusses the economic concept of demand. It defines demand as the quantity of a product that consumers are willing and able to purchase at various price levels. Demand is determined by factors such as price, income, tastes, and population. The law of demand states that, all else equal, demand decreases as price increases. However, there are some exceptions such as Giffen goods where demand increases with price. The document also discusses individual demand, market demand, demand curves, determinants of demand, and extensions/contractions in demand.
This document defines demand and differentiates it from quantity demanded. It explains that demand refers to the entire relationship between price and quantity, while quantity demanded refers to the quantity at a particular price point. A demand schedule is presented, showing quantity demanded at different price levels. The demand curve is plotted on a graph with price on the y-axis and quantity on the x-axis. The law of demand states that as price increases, quantity demanded decreases, resulting in an inverse relationship. Factors that can cause a shift in the demand curve, like income, price of substitutes, and expectations about future prices are also discussed.
The document summarizes the economic theory of supply and demand. It defines key concepts such as markets, demand, supply, and equilibrium price. Demand is determined by factors like income, wealth, prices of substitutes and complements, population, expected price, and tastes. Supply is determined by the costs of production faced by firms. The interaction of supply and demand forces in a competitive market determines the equilibrium price and quantity traded.
The document summarizes the economic theory of supply and demand. It defines key concepts such as markets, demand, supply, and equilibrium price. Demand is determined by factors like income, wealth, prices of substitutes and complements, population, expected price, and tastes. Supply is determined by the costs of production faced by firms. The interaction of supply and demand determines the equilibrium price in a market under perfect competition.
The document summarizes the economic theory of supply and demand. It defines key concepts such as markets, demand, supply, and equilibrium price. Demand is determined by factors like income, wealth, prices of substitutes and complements, population, expected price, and tastes. Supply is determined by the costs of production faced by firms. The interaction of supply and demand determines the equilibrium price in a market under perfect competition.
The document provides an overview of the economic theory of supply and demand. It defines key concepts such as markets, demand curves, supply curves, and equilibrium. It explains how demand and supply are determined by various factors and how equilibrium price and quantity are established through the interaction of supply and demand in a market. It also demonstrates how the equilibrium can change if supply or demand shifts due to external factors, through examples of income rising or an ice storm affecting supply.
The document provides an overview of the economic theory of supply and demand. It defines key concepts such as markets, demand curves, supply curves, and equilibrium. It explains how demand and supply are determined by various factors and how equilibrium price and quantity are established through the interaction of supply and demand in a market. It also demonstrates how the equilibrium can change if supply or demand shifts due to external factors, through examples of income rising or an ice storm affecting supply.
This document provides an overview of demand, supply, and market equilibrium concepts. It defines key terms like demand curve, supply curve, equilibrium price and quantity. It explains how shifts in demand or supply curves affect equilibrium. Specifically:
1) The law of demand and supply are introduced, which state that quantity demanded increases with lower price and quantity supplied increases with higher price.
2) Market equilibrium exists when quantity demanded equals quantity supplied. Disequilibrium can cause surplus or shortage.
3) A shift of the demand or supply curve changes the equilibrium price and quantity in the market. Both curves shifting can have different effects depending on the direction and magnitude of the shifts.
This document provides an overview of demand, supply, and market equilibrium concepts. It defines key terms like demand curve, supply curve, equilibrium price and quantity. It explains how shifts in demand or supply curves affect equilibrium. Specifically:
1) The law of demand and supply are introduced, which state that quantity demanded increases with lower price and quantity supplied increases with higher price.
2) Market equilibrium exists when quantity demanded equals quantity supplied. Disequilibrium can cause surplus or shortage.
3) A shift of the demand or supply curve changes the equilibrium price and quantity in the market. Both curves shifting can have varying effects depending on the direction and magnitude of the shifts.
1. The document discusses the fundamentals of demand and supply, including defining demand with a demand curve, the determinants of demand, and the difference between a shift in demand versus movement along a demand curve.
2. It explains that a demand curve slopes downward due to the law of demand and the law of diminishing marginal utility - as price increases, quantity demanded decreases.
3. The main determinants of demand are price of the good, income, tastes, prices of substitutes and complements, and expectations about future prices and income. A change in a determinant causes the demand curve to shift, while a change in price results in movement along the
This document provides an overview of indifference theory and consumer choice. It discusses key concepts such as:
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- Indifference curves show combinations of goods that provide the same satisfaction.
- A budget constraint limits what can be purchased with a given income.
- Consumers optimize by reaching the highest indifference curve possible given their budget.
- Marginal utility diminishes as consumption increases, so consumers equalize marginal utility per expenditure to maximize total utility.
1. Elasticity measures the responsiveness of quantity demanded or supplied to a change in its price. It is calculated as the percentage change in quantity divided by the percentage change in price.
2. Demand is more elastic when good substitutes are available and less elastic when substitutes are unavailable. Demand for necessities tends to be inelastic while demand for luxuries tends to be more elastic.
3. If demand is elastic, total revenue increases when price decreases as the rise in quantity sold outweighs the fall in price. If demand is inelastic, total revenue decreases with a price decrease as quantity does not rise enough.
This document discusses target marketing and product positioning. It explains that companies can no longer appeal to all buyers, so they must design customer-driven strategies targeting specific market segments. This involves segmentation, differentiation, targeting, and positioning the product to create value for targeted customers. Effective positioning involves choosing differentiators that are important, distinctive, superior, and communicable. A product's position is defined by how consumers perceive it relative to competitors on important attributes. Maps can show perceived positioning. Good positioning aligns with the product's value proposition and competitive advantages.
This document provides an overview of the Marketing Management I course taught by Dhruva Chak. It includes the course textbooks, assessment criteria which is 50% from an end term exam, and marketing definitions from various sources including the Chartered Institute of Marketing, American Marketing Association, Philip Kotler, and Peter Drucker. Key marketing concepts are also summarized such as the marketing process, the difference between selling and marketing, that marketing is a frame of mind for an entire organization, and why marketing is important.
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This document discusses market segmentation strategies. It defines segmentation as identifying customer groups that respond differently to offerings. A successful segmentation strategy couples identified segments with tailored offerings. Key factors for evaluating segmentation strategies are whether a competitive offering can be developed and maintained for the target segment, and if the resulting business is worthwhile given investment costs. Successful segmentation creates a dominant market position that is difficult for competitors to challenge. The document then provides examples of segmenting by customer characteristics like demographics, and product-related factors like usage and benefits sought. It stresses the importance of developing profiles for identified segments.
Michael Porter identified three generic strategies that businesses can pursue to achieve competitive advantage: cost leadership, differentiation, and focus (niche). Cost leadership involves having the lowest costs in the industry, differentiation means offering unique product features that customers value, and focus means targeting a specific market segment. Porter also identified a "middle of the road" strategy that tries to do all three, which is unlikely to lead to competitive advantage. Businesses should analyze their strengths to determine which generic strategy is most suitable.
The document discusses competitor analysis and strategies. It provides examples of how Japanese firms carefully studied US and European competitors in the 1960s to understand their strategies and penetrate foreign markets. In contrast, US firms were slow to analyze Japanese competitors. The document also discusses Nirma, an Indian company that grew rapidly by analyzing Hindustan Lever's strategies and launching lower-priced detergent products to target new market segments. It emphasizes the importance of carefully analyzing both direct and indirect competitors to better understand competitive threats and opportunities.
Samsung was founded in 1938 as a grocery store in Korea and later expanded into textiles and electronics. In the 1970s, Samsung began exporting home electronics and became a major electronics producer in Korea. The company continued advancing its technology and quality, with some products reaching top 5 positions worldwide. Samsung introduced its popular Galaxy smartphone series in the 2000s, which helped it become the top global smartphone seller. However, Samsung now faces challenges from competitors like Xiaomi and Vivo who have gained market share in key regions. Its brand image and channel strategy difficulties have provided opportunities for other brands.
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The Rise of Generative AI in Finance: Reshaping the Industry with Synthetic DataChampak Jhagmag
In this presentation, we will explore the rise of generative AI in finance and its potential to reshape the industry. We will discuss how generative AI can be used to develop new products, combat fraud, and revolutionize risk management. Finally, we will address some of the ethical considerations and challenges associated with this powerful technology.
"Does Foreign Direct Investment Negatively Affect Preservation of Culture in the Global South? Case Studies in Thailand and Cambodia."
Do elements of globalization, such as Foreign Direct Investment (FDI), negatively affect the ability of countries in the Global South to preserve their culture? This research aims to answer this question by employing a cross-sectional comparative case study analysis utilizing methods of difference. Thailand and Cambodia are compared as they are in the same region and have a similar culture. The metric of difference between Thailand and Cambodia is their ability to preserve their culture. This ability is operationalized by their respective attitudes towards FDI; Thailand imposes stringent regulations and limitations on FDI while Cambodia does not hesitate to accept most FDI and imposes fewer limitations. The evidence from this study suggests that FDI from globally influential countries with high gross domestic products (GDPs) (e.g. China, U.S.) challenges the ability of countries with lower GDPs (e.g. Cambodia) to protect their culture. Furthermore, the ability, or lack thereof, of the receiving countries to protect their culture is amplified by the existence and implementation of restrictive FDI policies imposed by their governments.
My study abroad in Bali, Indonesia, inspired this research topic as I noticed how globalization is changing the culture of its people. I learned their language and way of life which helped me understand the beauty and importance of cultural preservation. I believe we could all benefit from learning new perspectives as they could help us ideate solutions to contemporary issues and empathize with others.
5 Tips for Creating Standard Financial ReportsEasyReports
Well-crafted financial reports serve as vital tools for decision-making and transparency within an organization. By following the undermentioned tips, you can create standardized financial reports that effectively communicate your company's financial health and performance to stakeholders.
Solution Manual For Financial Accounting, 8th Canadian Edition 2024, by Libby...Donc Test
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2. Elemental Economics - Mineral demand.pdfNeal Brewster
After this second you should be able to: Explain the main determinants of demand for any mineral product, and their relative importance; recognise and explain how demand for any product is likely to change with economic activity; recognise and explain the roles of technology and relative prices in influencing demand; be able to explain the differences between the rates of growth of demand for different products.
Lecture slide titled Fraud Risk Mitigation, Webinar Lecture Delivered at the Society for West African Internal Audit Practitioners (SWAIAP) on Wednesday, November 8, 2023.
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2. Learning outcomes
The participants in markets and what motivates
them.
The main factors that influence how much of a
product consumers wish to buy.
The main influences on how much producers wish
to sell.
How consumers and producers interact to
determine the market price.
While demand and supply forces are present in
all markets, many different institutional
structures also affect market outcomes.
3. Demand
An individual consumer’s demand curve shows the relation
between the price of a product and the quantity of that
product the customer wishes to purchase per period of
time.
It is drawn on the assumption that all other prices,
income, and tastes remain constant.
Its negative slope indicates that the lower the price of the
product, the more the consumer wishes to purchase.
The market demand curve is the horizontal sum of all the
individual consumers.
DEMAND, SUPPLY AND PRICE
4. Demand
In formulating our demand theory, the
agents are all assumed to be adult
individuals who earn income, and they
spend this income purchasing various
goods and services.
The consumer ‘is assumed to ‘maximize
utility’ within the limits set by his or her
available resources.
5. The nature of demand
The amount of a product that consumers
wish to purchase is called the quantity
demanded.
Note there are two important things about
this concept.
First, quantity demanded is a desired quantity ie
how much consumers wish to purchase given the
resources at their command.
Secondly, quantity demanded is a flow.
6. Demand Function
Determinants of Demand / Demand Function:
Qd =f(Pn, Pr, Y, T, U)
Price of the commodity.
Price of related commodities i.e. substitutes or
complementary goods.
Level of Income and Wealth
Tastes and preferences of consumers
Size and composition of population
Distribution of income
Wealth conditions
Credit Availability
Other factors
7. Alice’s Demand Schedule
Reference Letter Price [£ per dozen] Quantity demanded
[dozen per month]
a
b
c
d
e
f
Alice’s Demand Curve
1 2 3
0.50
1.00
2.00
Quantity of Eggs [dozen per month]
3.00
2.50
6
5
4 7
a
b
c
e
d
f
1.50
DEMAND
0.50
1.00
1.50
2.00
2.50
3.00
7.0
5.0
3.5
2.5
1.5
1.0
8. Alice’s demand schedule for
eggs
The table shows the quantity of eggs that Alice
will demand at each selected price, other things
being equal.
For example, at a price of £1.00, Alice demands
5 dozen eggs per month.
The data is plotted in the figure ‘Alice’s demand
curve’.
9. Alice’s demand curve
Each point on the figure relates to a row on Table
Demand Schedule.
For example, when price is £3.00, 1 dozen are
brought per month (point f ).
When the price is £0.50, 7 dozen are brought
(point a).
The resulting curve relates the price of a
commodity to the amount that Alice wishes to
purchase.
10. 2 4 6 8 10 12
2 4 6
1.00
2.00
3.00
1.00
2.00
3.00
8
14
Quantity of Eggs
[dozen per month]
Quantity of Eggs
[dozen per month]
The Relation Between Individual and Market Demand Curves
[i]. William
[ii]. Sarah
[iii]. Total Demand William & Sarah
2 4 6
1.00
2.00
3.00
Quantity of Eggs
[dozen per month]
8
11. The relation between individual
and market demand curves
The figure illustrates aggregation over two
individuals, William and Sarah.
For example, at a price of £2.00 per dozen
William purchases 2.4 dozen and Sarah
purchases 3.6 dozen.
Together they purchase 6 dozen.
In general the market demand curve is the
horizontal sum of the demand curves of all
consumers in the market.
12. A Market Demand Schedule for Eggs
Reference Letter Price [£ per dozen]
Quantity demanded
[000 dozen per month]
0.50
1.00
1.50
2.00
2.50
3.00
110.0
90.0
77.5
67.5
62.5
60.0
U
V
W
X
Y
Z
13. The table shows the quantity of eggs that would
be demanded by all consumers at selected
prices, ceteris paribus.
For example, row W indicates that if the price of
eggs were £1.50 per dozen, consumers would
want to purchase 77,500 dozen per month.
The data in this table are plotted in the following
figure.
A Market Demand Schedule for Eggs
14. Quantity of Eggs (000/month)
20 40 60 80 100 120
1.00
2.00
3.00
140
A Market Demand Curve for Eggs
2.50
1.50
3.50
0.50
Z
D
Y
X
W
V
U
15. The negative slope of the curve indicates
that quantity demanded increases as price
falls.
The six points correspond to the six price–
quantity combinations shown in the table.
The curve drawn through all of the points
and labelled D is the demand curve.
A Market Demand Curve for Eggs
16. 20 40 60 80 100 120
1.00
2.00
3.00
140
Quantity of Eggs (000/month)
Two Demand Curves for Eggs
2.50
1.50
3.50
0.50
Z
D0
Y
X
W
V
U
17. A Market Demand Schedule for Eggs
when income rises
Reference Letter Price [£ per dozen]
Quantity demanded
[000 dozen per month]
0.50
1.00
1.50
2.00
2.50
3.00
140.0
116.0
100.0
90.0
81.3
78.0
Quantity demanded
[000 dozen per month]
when income rises
110.0
90.0
77.5
67.5
62.5
60.0
U’
V’
W’
X’
Y’
Z’
U
V
W
X
Y
Z
18. 20 40 60 80 100 120
1.00
2.00
3.00
140
2.50
1.50
3.50
0.50
Z
D0
Y
X
W
V
U
D1
Z’
Y’
X’
W’
V’
U’
Two Demand Curves for Eggs
Quantity of Eggs (000/month)
19. Two demand curves for eggs
When the curve shifts from D0 to D1, more is
demanded at each price and a higher price is paid
for each quantity.
At price £1.50, quantity demanded rises from
77.5 thousand dozen (point W) to 100 (point W’).
The quantity of 90 thousand dozen, which was
formerly bought at a price of £1.00 (point V), will
be brought at a price of £2.00 after the shift
(point X’).
24. Note
A rise in the price of a product’s substitute
shifts the demand curve for the product to
the right. More will be purchased at each
price.
A fall in the price of one product that is
complementary to a second product will
shift the second product’s demand curve
to the right. More will be purchased at
each price.
25. Movements along demand
curves versus shifts
Demand refers to one whole demand
curve.
Change in demand refers to a shift in
the whole curve, that is, a change in the
amount that will be bought at every price.
26. Note
An increase in demand means that the
whole demand curve has shifted to the
right; a decrease in demand means that
the whole demand curve has shifted to
the left.
Any one point on a demand curve represents
a specific amount being bought at a specified
price. It represents, therefore, a particular
quantity demanded.
27. Note
A movement down a demand curve is
called an extension in the quantity
demanded; a movement up the
demand curve is called a contraction in
the quantity demanded.
A movement along a demand curve is
referred to as a change in the quantity
demanded.
28. Shifts in the demand curve
When the demand curve shifts from D0 to D1,
more is demanded at each price.
Such an increase in demand can be caused by:
A rise in the price of a substitute
A fall in the price of a complement
A rise in income
A redistribution of income towards those who
favour the commodity
A change in tastes that favours the commodity.
29. Shifts in the demand curve
When the demand curve shifts from D0 to D2,
less is demanded at each price.
Such a decrease in demand can be caused by:
a fall in the price of a substitute
a rise in the price of a complement, a fall in
income
a redistribution of income away from groups
that favour the commodity
a change in tastes that dis-favours the
commodity.
30. Demand and price
We are interested in developing a
theory of how products get priced.
To do this, we hold all other influences
constant and ask the following
question:
‘How will the quantity of a product
demanded vary as its own price
varies?’
31. Note
A basic economic hypothesis is that
the lower the price of a product, the
larger the quantity that will be
demanded, other things being equal.
32. Exception to Law of Demand
Giffen goods : According to Sir Giffen, when the price of cheap
foodstuff like bread increased, people bought more and consumed
more and not less of it. Eg: A rise in the price of bread caused a
decline in the purchasing power of the poor such that they were
forced to cut down the consumption of other items like meat,
vegetables etc as bread even though its price had increased was
cheaper than other items.
Conspicuous Necessities : Commodities like TV, fridge as through
their constant use they have become necessities of life.
Conspicuous consumption : Goods like diamond etc. where with an
increase in price of the good, Quantity demanded increases.
Future changes in price : Households act as speculators. Eg: Realty
prices etc.
Emergencies : Like war, flood negate the operation of law of demand.
Change in fashion
Ignorance
33. Note
Substitution effect : When price falls,
quantity demanded of the commodity by
the individual increases as the individual
substitutes in consumption commodity X for
other commodities. This is called the
substitution effect.
Income Effect: When the price of a
commodity falls, a consumer can purchase
more of the commodity with a given money
income, (ie real income in the hands of
consumer increases) This is called the
income effect
34. Note
Derived Demand: The demand faced by a firm
will determine the type and quantity of inputs or
resources that the firm will purchase or hire in
order to produce or meet the demand for goods
and services that it sells.
Since the demand for the inputs or resources
that a firm uses depends on the demand for the
goods and services that it sells, the firm’s
demand for inputs is derived demand.
Rather, the firms demand for producer goods ie
capital equipment and raw materials that can be
stored, is even more volatile and unstable than
the firms demand for perishable raw materials.
35. Supply
We now look at the supply side of
markets. The suppliers are firms, which
are in business to make the goods and
services that consumers want to buy.
36. Firms’ motives
Economic theory gives firms several
attributes.
Firstly, each firm is assumed to make consistent
decisions, as though it was run by a single
individual decision-maker.
Secondly, firms hire workers and invest capital
and entrepreneurial talent in order to produce
goods and services that consumers wish to buy.
Thirdly, firms are assumed to make their decisions
with a single goal in mind: to make as much profit
as possible.
37. The nature of supply
The amount of a product that firms are
able and willing to offer for sale is called
the quantity supplied.
Supply is a desired flow: how much firms
are willing to sell per period of time, not
how much they actually sell.
38. The determinants of quantity
supply
Major determinants of the quantity
supplied in a particular market are:
◦ the price of the product;
◦ the prices of inputs to production;
◦ the state of technology
◦ Availability of credit
◦ Joint supply
◦ Expectation of future prices
◦ Number of producers
39. Supply and price
For a simple theory of price, we need to
know how quantity supplied varies with a
product’s own price, all other things being
held constant.
‘The quantity of any product that firms
will produce and offer for sale is
positively related to the product’s own
price, rising when the price rises and
falling when the price falls.’
40. A Market Supply schedule for Eggs
Reference Letter Price [£ per dozen] Quantity demanded
[000 dozen per month]
w
y
u
v
z
x
0.50
1.00
2.00
2.50
1.50
5.0
77.5
100.0
3.00
46.0
122.5
115.0
41. A market supply schedule for
eggs
The table shows the quantities that
producers wish to sell at various prices,
ceteris paribus.
For example, row y indicates that if the
price were £2.50, producers would wish
to sell 115,000 dozen eggs per month.
The data in this table are plotted in the
following figure.
42. 20 40 60 80 100 120
1.00
2.00
3.00
140
Quantity of Eggs[thousand dozen per month]
A Supply Curve For Eggs
2.50
1.50
3.50
0.50
Z
S
Y
X
W
V
U
43. A supply curve for eggs
The six points correspond to the price-quantity
combinations shown in Table ‘A Market Supply
Schedule for Eggs’.
The curve drawn through these points, labeled
S, is the supply curve showing the quantity of
eggs that will be supplied at each price of
eggs.
The supply curve’s positive slope indicates that
quantity supplied increases as price increases.
44. Two Alternative Market Supply Schedule for Eggs
[1]
Price of Eggs
[£ per dozen]
New quantity
supplied [‘000
dozen per month]
w
y
u
v
z
x
0.50
1.00
2.00
2.50
1.50
5.0
77.5
100.0
3.00
46.0
122.5
Original quantity
supplied [‘000
dozen per month]
115.0
28.0
76.0
102.0
120.0
132.0
140.0
U’
V’
W’
X’
Y’
Z’
[2] [3] [4] [5]
45. 20 40 60 80 100 120
1.00
2.00
3.00
140
Quantity of Eggs [thousand dozen per month]
Two Supply Curves for Eggs
2.50
1.50
3.50
0.50
Z
S0
Y
X
W
V
U
46. 20 40 60 80 100 120
1.00
2.00
3.00
140
Quantity of Eggs [thousand dozen per month]
2.50
1.50
3.50
0.50
Z
S0
Y
X
W
V
U
S1
Two Supply Curves for Eggs
47. Two supply curves for eggs
The rightward shift in the supply curve
from S0 to S1 indicates an increase in the
quantity supplied at each price.
For example, at the price of £1.00 the
quantity supplied rises from 46 to 76
thousand dozen per month.
52. Shifts in the supply curve
A shift in the supply curve from S0 to S1 indicates
more is supplied at each price.
Such an increase in supply can be caused by:
Improvements in the technology of producing the
commodity
A fall in the price of inputs that are important in
producing the commodity
A shift in the supply curve from S0 to S2 indicates less
is supplied at each price.
Such a decrease in supply can be caused by:
A rise in the price of inputs that are important in
producing the commodity.
Changes in technology that increase the costs of
producing the commodity (rare).
53. The determination of price
So far we have considered demand and
supply separately.
We now outline how demand and supply
interact to determine price.
54. The concept of a market
A market may be defined as an area over
which buyers and sellers negotiate the
exchange of some product or related
group of products.
It must be possible, therefore, for buyers
and sellers to communicate with each
other and to make meaningful
transactions over the whole market.
55. Demand and Supply Schedules for Eggs and Equilibrium Price
Price
[£ per dozen]
Quantity supplied
[‘000 dozen
per month]
0.50
1.00
2.00
2.50
1.50
110.0
77.5
67.5
3.00
90.0
60.0
Quantity
demanded
[‘000 dozen
per month]
62.5
5.0
46.0
77.5
100.0
115.0
122.5
105.0
44.0
0.0
-32.5
-52.5
-62.5
Excess Demand [quantity
demanded minus
quantity supplied]
[‘000 dozen per month]
56. Demand and supply schedules for
eggs and equilibrium price
Equilibrium occurs where the quantity demanded and the
quantity supplied are equal.
In the table the equilibrium price is £1.50.
The equilibrium quantity bought and sold is 77.5
thousand dozen per month.
For prices below the equilibrium, such as £0.50, quantity
demanded (110) exceeds quantity supplied (5).
For prices above the equilibrium, such as £3.00, quantity
demanded (60) is less than quantity supplied (122.5).
The data in this table are plotted in the following figure.
57. 20 40 60 80 100 120
1.00
2.00
3.00
140
Quantity of Eggs [thousand dozen per month]
2.50
1.50
3.50
0.50
Z
S
Y
X
W
V
U
D
U
V
W
X
Y
Z
Determination of the Equilibrium Price of Eggs
58. Determination of the equilibrium
price of eggs
Equilibrium price is where the demand and
supply curves intersect, point E in the
figure.
At all prices above equilibrium there is
excess supply and downward pressure on
price.
At all prices below equilibrium there is
excess demand and upward pressure on
price.
59. The ‘Laws’ of Demand and Supply
D
S
[ii]. The effects of shifts in the supply curve
Quantity
Quantity
[i]. The effects of shifts in the demand curve
S0
q0
E0
p0
p0
E0
q0
p1
p1
q1
q1
E1
E1
D1
D0
S1
60. The laws of demand and supply
(i) shifts in demand
The original curves are D0 and S, which intersect to
produce equilibrium at E0.
Price is p0, and quantity q0.
An increase in demand shifts the demand curve to D1.
Price rises to p1 and quantity rises to q1 taking the new
equilibrium to E1.
A decrease in demand now shifts the demand curve to D0.
Price falls to p0 and quantity falls to q0 taking the new
equilibrium to E0.
Thus, an increase in demand raises both price and
quantity while a decrease in demand lowers both price and
quantity.
Fall in demand brings down the equilibrium price and
quantity sold and purchased also declines.
61. The laws of demand and supply
(ii) shifts in supply
The original demand and supply curves are D and S0,
which intersect to produce an equilibrium at E0, price p0
and quantity q0.
An increase in supply shifts the supply curve to S1. Price
falls to p1 and quantity rises to q1, taking the new
equilibrium to E1.
A decrease in supply shifts the supply curve back to S0.
Price rises to p0 and quantity falls to q0 taking the new
equilibrium to E0.
Thus an increase in supply raises quantity but lowers
prices while a decrease in supply lowers quantity but
raises price.
Joint Demand:
When the two commodities are complimentary to one
another, they maybe jointly demanded. A change in
demand for one commodity will bring about a similar
change in demand for the other commodity.
62. Assumption concerning a competitive
market
The law of demand: demand curves have
negative slopes throughout their entire
ranges
The theory of supply: supply curves have
positive slopes throughout their entire
ranges
The law of price adjustment: prices rise
when demand exceeds supply, and fall if
supply exceeds demand.
63. Implications
There is no more than one price at which
quantity demanded equals quantity
supplied; equilibrium is unique.
Only at the equilibrium price will the
market price remain constant.
When the demand or supply curve shifts,
the equilibrium price and quantity will
change.
The market is stable in the sense that
forces exist to move the price towards its
market clearing level.