The document outlines the key assumptions and concepts of the supply and demand model. It assumes rational behavior by market participants and that all other factors remain constant ("ceteris paribus"). It defines demand as the quantity willing and able to be purchased at a given price. The law of demand states that, ceteris paribus, quantity demanded decreases when price rises and increases when price falls. Shifts in the demand curve represent changes in demand from non-price factors like number of buyers, income levels, prices of related goods, preferences, and expectations.

1. Supply and Demand model

2. Supply and Demand Model
- A Competitive Market
Assumptions:
- market with many buyers and many
sellers and perfect information.
To began analyzing the model and to make it work, we assume a few assumptions in place first:
- No monopolies. 没有垄断

3. 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 - People usually exploit opportunities
to make themselves better off.

4. 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

5. 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 It’s important to note, that just
because you want something doesn’t
always mean you Demand it.
( Demand is only what we can measure. )
Key point:
We will focus on Demand first

6. So do you like
cake?

7. Would you like
one like this?

8. Or would you
like one like
this?

9. I was hoping these pictures would have you think about cake differently.
Why did I show you this?
First you wanted cake...
then you didn’t.
But I never talked about prices of cake!!!

10. - Ceteris Paribus, (all other things staying the same) the
relationship between the quantity demanded and the
price of a good.
你要多少, 在一个给定的的价格
Supply and Demand Model
Demand

11. Do you like
Chicken?

12. Or maybe not
like chicken?

13. - Ceteris Paribus, (all other things staying the same) the
relationship between the quantity demanded and the
price of a good.
你要多少, 在一个给定的的价格
Supply and Demand Model
Demand
This idea change
is a change in
Demand

14. Would you buy it
at this price?

15. 99元
127元
Would you buy it
at this price now?

16. - The amount of anything that people are
willing and able to buy during a specified
period at a specified price.
现在购买， 在这个价位
Supply and Demand Model
Quantity
Demanded
This change due to price is a
change in Quantity Demanded

17. - The amount of anything that people are
willing and able to buy during a specified
period at a specified price.
现在购买， 在这个价位
Supply and Demand Model
Demand
Quantity
Demanded
This one is about
prices
This one is NOT
about prices

18. - The amount of anything that people are
willing and able to buy during a specified
period at a specified price.
现在购买， 在这个价位
Supply and Demand Model
Demand
Quantity
Demanded
- Ceteris Paribus, (all other things staying the same) the
relationship between the quantity demanded and the
price of a good.
你要多少, 在一个给定的的价格
+
=
The Law of
Demand
Ceteris Paribus, (all other things staying the same)
If the price of a good rises, the quantity demanded decreases.
If the price of a good falls, the quantity demanded increases

19. Supply and Demand Model
The Law of
Demand
Ceteris Paribus, (all other things staying the same)
If the price of a good rises, the quantity demanded decreases.
If the price of a good falls, the quantity demanded increases
This is a movement along the demand curve and
does not change where the demand curve is.
Price
Price
Quantity Demanded
Quantity Demanded

20. 7
8
8.1
8.9
10.0
11.5
14.2
Price of
chicken (per
pound/500kg)
Quantity of chicken
demanded (billions
of pounds/500kg)
6
5
4
3
2
1
7
Demand Schedule for chicken
DEMAND
70 9 11 1513 17
7
6
5
4
3
2
1
Price of
chicken (per
pound)
Quantity of chicken (billions
of pounds)
Demand
curve, D
A movement along the
demand curve is a change in
the quantity demanded of a
good that is the result of a
change in that good’s price.

21. 7
8
8.1
8.9
10.0
11.5
14.2
Price of
chicken (per
pound/500kg)
Quantity of chicken
demanded (billions
of pounds/500kg)
6
5
4
3
2
1
7
Demand Schedule for chicken
DEMAND (quantity)
70 9 11 1513 17
7
6
5
4
3
2
1
Price of
chicken (per
pound)
Quantity of chicken (billions
of pounds)
Demand
curve, D
A
B
A movement along the
demand curve is a change in
the quantity demanded of a
good that is the result of a
change in that good’s price.

22. 7 8.1 9.70 10 1513 17
$2.00
1.75
1.50
1.25
1.00
0.75
0.50 D
1
D
2
A C
B
A shift of the
demand curve…
… is not the same
thing as a
movement along
the demand curve
Price of
chicken
(per
500kg))
Quantity of chicken
(billions of 500kg)
Changes (shifts) in DEMAND

23. Changes in Demand without the price changing
Shift Left
Shift Right
DEMAND (shifts)
This is a shift of the demand curve itself at any given
price
= Less Demand at the same price
= More Demand at the same price

24. An “increase in demand”
means a rightward shift of
the demand curve: at any
given price, consumers
demand a larger quantity
than before. (D1D2)
Shifts of the Demand Curve
A “decrease in demand”,
means a leftward shift of
the demand curve: at any
given price, consumers
demand a smaller quantity
than before. (D1D3)
Price
Quantity
D3
D
1 D2
Increase in
demand
Decrease in
demand

25. Changes (shifts) in DEMAND
(NOT quantity demanded)
1.) Number of Buyers
2.) Income
i) Normal goods
ii) Inferior goods
3.) Prices of Related Goods
i) Substitutes
ii) Compliments
a.) Composite Demand
b.) Joint Demand
4.) Preferences
5.) Expectations
The short answer is:
Everything else that is
NOT due to a change
in price!
5 main reasons:

26. More people = more Demand at every given price
Less people = less Demand at every given price
Changes (shifts) in DEMAND
1.) Number of Buyers

27. Demand…

28. More Demand…

29. 2.) Income
i.) Normal good
Demand increases when income increases
Demand decreases when income decreases
A good for which
and
Changes (shifts) in DEMAND
1.) Number of Buyers

30. Income
Increase
i.) Normal good
Demand increasesBuy more of this at
the same price
Income
Decrease
Demand decreasesBuy less of this at the
same price

31. 2.) Income
i.) Normal good
Changes (shifts) in DEMAND
1.) Number of Buyers
ii.) Inferior good
Demand increases when income decreases
A good for which
and
Demand decreases when income increases

32. Income
Increase
Demand decreaseBuy less of this at
the same price
Income
Decrease
Demand increasesBuy more of this at
the same price
ii.) Inferior good

33. 2.) Income
Changes (shifts) in DEMAND
1.) Number of Buyers
3.) Prices of Related goods
i.) Substitutes替代
Demand increases, if the price of its substitutes rises.
A good that can be consumed in place of
another good.
Demand decreases, if the price of its substitutes falls.
and

34. Price of this goes up
i.) Substitute
Increase Demand of this
= Buy less of it
but more of this =
Price of this goes
down
Decrease Demand of this
= Buy more of this
but less of this =

35. 2.) Income
Changes (shifts) in DEMAND
1.) Number of Buyers
3.) Prices of Related goods
i.) Substitutes
ii.) Complement 补充 A good that is consumed with another good.
Demand increases, if the price of its complements falls.
and
Demand decreases, if the price of its complements rises.

36. Price of this goes up
Decrease demand of this
= Buy less of it
and buy less
of this =
Price of this goes down Increase demand of this
= Buy more of it
and buy more
of this =
(the price of this didn’t change)i.) Complement

37. 2.) Income
Changes (shifts) in DEMAND
1.) Number of Buyers
3.) Prices of Related goods
i.) Substitutes
ii.) Complement 补充
- Composite Demand A good of service demanded
that has multiple uses.

38. Ipads can have
many uses

39. But usually in
my house only
one use

40. 2.) Income
Changes (shifts) in DEMAND
1.) Number of Buyers
3.) Prices of Related goods
i.) Substitutes
ii.) Complement 补充
- Composite Demand
- Joint Demand When two or more goods are
demanded to satisfy the same want.
not substitutes for each other,
but are complement each other.

41. Cars + Gasoline
= Let’s go!

42. 2.) Income
Changes (shifts) in DEMAND
1.) Number of Buyers
3.) Prices of Related goods
4.) Preferences 首选项
When preferences change, the demand for
one item increases and the demand for
another item (or items) decreases.

43. More people used
to smoke because
it was OK

44. Today preferences
have changed in
many places

45. 2.) Income
Changes (shifts) in DEMAND
1.) Number of Buyers
3.) Prices of Related goods
4.) Preferences
Expected future income and expected future
prices influence demand today.
For example:
if the price of a computer is expected to fall next month,
the demand for computers today decreases.
5.) Expectations 期望

46. Expecting rain?

47. means higher demand
for an umbrellas

48. Changes (shifts) in DEMAND
(NOT quantity demanded)
1.) Number of Buyers
2.) Income
i) Normal goods
ii) Inferior goods
3.) Prices of Related Goods
i) Substitutes
ii) Compliments
a.) Composite Demand
b.) Joint Demand
4.) Preferences
5.) Expectations
The short answer is:
Everything else that is
NOT due to a change
in price!
5 main reasons:

49. Individual Demand All of these factors are related to individual
demand of stuff.
We want to also look at markets as a whole
of many people.
We have seen so far that number of buyers
is related to changes in demand.
Supply and Demand Model

50. Individual Demand
Supply and Demand Model
The sum of the demands of all the buyers in a
market.
Add up each person’s Individual Demand =
Market Demand
Market Demand

51. All these reasons
discussed are for
individual people

52. +
+
+
+
+
+
=
For the market, just
add them all up!

53. So to Summarize…

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. - The amount of anything that people are
willing and able to buy during a specified
period at a specified price.
现在购买， 在这个价位
Supply and Demand Model
Demand
Quantity
Demanded
- Ceteris Paribus, (all other things staying the same) the
relationship between the quantity demanded and the
price of a good.
你要多少, 在一个给定的的价格
+
=
The Law of
Demand
Ceteris Paribus, (all other things staying the same)
If the price of a good rises, the quantity demanded decreases.
If the price of a good falls, the quantity demanded increases

56. Supply and Demand Model
The Law of
Demand
Ceteris Paribus, (all other things staying the same)
If the price of a good rises, the quantity demanded decreases.
If the price of a good falls, the quantity demanded increases
This is a movement along the demand curve and
does not change where the demand curve is.
Price
Price
Quantity Demanded
Quantity Demanded

57. 7 8.1 9.70 10 1513 17
$2.00
1.75
1.50
1.25
1.00
0.75
0.50 D
1
D
2
A C
B
A shift of the
demand curve…
… is not the same
thing as a
movement along
the demand curve
Price of
chicken
(per
500kg))
Quantity of chicken
(billions of 500kg)
Changes (shifts) in DEMAND

58. Changes (shifts) in DEMAND
(NOT quantity demanded)
1.) Number of Buyers
2.) Income
i) Normal goods
ii) Inferior goods
3.) Prices of Related Goods
i) Substitutes
ii) Compliments
a.) Composite Demand
b.) Joint Demand
4.) Preferences
5.) Expectations
The short answer is:
Everything else that is
NOT due to a change
in price!
5 main reasons:

59. The End
Thank you
