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Demand & Supply ,[object Object],[object Object],[object Object],[object Object],[object Object]
Build a model ,[object Object],[object Object],[object Object]
Use the model ,[object Object],[object Object],[object Object],[object Object]
Demand ,[object Object],[object Object],[object Object],[object Object],[object Object]
quantity demanded (Qd) ,[object Object],[object Object],[object Object],[object Object]
Law of Demand If the price of a good  then the Qd holding other things constant!!!
Why? ,[object Object],[object Object],[object Object],[object Object],[object Object]
Example:  bottles of water per day ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Demand Schedule P Qd Price = $/bottle Qd = bottles/day $2.00 0 $1.50 1 $1.00 2 $.50 3
Demand curve P Qd 0  1  2  3  4 2 1.5 1 .5 D
[object Object],[object Object],[object Object],[object Object],[object Object]
Changes in Demand ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
increase in demand ,[object Object],[object Object]
P Qd 0  1  2  3  4 2 1.5 1 .5 D D’
decrease in demand ,[object Object],[object Object]
P Qd D D’’
Factors affecting demand ,[object Object],[object Object],[object Object],[object Object],[object Object]
income ,[object Object],[object Object],[object Object],[object Object],[object Object]
[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Prices of related goods ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
substitutes ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
complements ,[object Object],[object Object],[object Object],[object Object]
buyer expectations ,[object Object],[object Object],[object Object],[object Object]
[object Object],[object Object],[object Object]
# of buyers ,[object Object],[object Object],[object Object],[object Object],[object Object]
[object Object],[object Object],[object Object],[object Object],[object Object]
preferences ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
[object Object],[object Object],[object Object]
Important!! ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
[object Object],[object Object],[object Object]
Change in Qd P Qd D
Change in Demand P Qd D D
Supply ,[object Object],[object Object],[object Object],[object Object],[object Object]
Law of Supply If the price of a good  then the Qs holding other things constant!!!
Why? ,[object Object],[object Object]
Supply Schedule P Qs Price = $/bottle Qs = bottles/day $2.00 3 $1.50 2 $1.00 1 $.50 0
Supply curve P Qs 0  1  2  3  4 2 1.5 1 .5 S
[object Object],[object Object],[object Object],[object Object],[object Object]
Changes in Supply ,[object Object],[object Object],[object Object]
increase in supply ,[object Object],[object Object]
P Qs S S’
decrease in supply ,[object Object],[object Object]
P Qs S S’’
Factors affecting supply ,[object Object],[object Object],[object Object],[object Object],[object Object]
Cost of inputs ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Prices of related goods ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Seller expectations ,[object Object],[object Object],[object Object],[object Object]
# of sellers ,[object Object],[object Object]
Productivity ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Important!! ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
[object Object],[object Object],[object Object]
Change in Qs P Qs S
Change in Supply P Qs S S’’
Market Equilibrium ,[object Object],[object Object],[object Object],[object Object]
Market for Bottled Water P (millions bottles per day) Q D S $10 10 Equilibrium
Why is this an equilibrium? ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Changes in equilibrium ,[object Object],[object Object],[object Object]
Example 1 ,[object Object],[object Object],[object Object]
Which curve is affected? ,[object Object],[object Object],[object Object]
Increase or decrease in supply? ,[object Object],[object Object],[object Object]
P (millions bottles per day) S Q D $10 10 S’ Equilibrium: P Q
note ,[object Object],[object Object],[object Object],[object Object],[object Object]
Example 2 ,[object Object],[object Object],[object Object]
Which curve is affected? ,[object Object],[object Object],[object Object]
Increase or decrease in demand? ,[object Object],[object Object],[object Object]
P (millions bottles per day) S Q D $10 10 D’ Equilibrium: P Q
Example 3 ,[object Object],[object Object],[object Object]
Which curve is affected? ,[object Object],[object Object],[object Object],[object Object],[object Object]
Increase or decrease? ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
P (millions bottles per day) S Q D D’ Equilibrium: P Q  ? S’
Example 4: Leather sandals ,[object Object],[object Object],[object Object],[object Object]
P Q S D S’ Supply decreases Q decreases P increases
B. ,[object Object],[object Object],[object Object]
P Q S D D’ demand decreases Q decreases P decreases
Example 5: Natural Gas Prices ,[object Object],[object Object],[object Object]
[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
P Q S D S’ Decrease in Supply
Why would S fall? ,[object Object],[object Object],[object Object],[object Object],[object Object]
P Q S D D’ Increase in Demand
[object Object],[object Object],[object Object],[object Object],[object Object]
Why did P rise? ,[object Object],[object Object]
Price ceiling ,[object Object],[object Object],[object Object]
rent ceiling = $1200 Rent Q S D $2500 500 $1200 250 750
Qd = 750 units Qs = 250 units at P = $1200: Rent Q S D $2500 500 $1200 250 750 SHORTAGE
who gets housing? ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Result ,[object Object],[object Object],[object Object],[object Object]
Why have rent control? ,[object Object],[object Object],[object Object],[object Object],[object Object]

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