Mankiew chapter 7 Consumers, Producers, and the Efficiency of MarketsAbd ELRahman ALFar
What is consumer surplus? How is it related to the demand curve?
What is producer surplus? How is it related to the supply curve?
Do markets produce a desirable allocation of resources? Or could the market outcome be improved upon?
Mankiew chapter 7 Consumers, Producers, and the Efficiency of MarketsAbd ELRahman ALFar
What is consumer surplus? How is it related to the demand curve?
What is producer surplus? How is it related to the supply curve?
Do markets produce a desirable allocation of resources? Or could the market outcome be improved upon?
CONSUMERS, PRODUCERS, AND THE EFFICIENCY OF MARKETSFaHaD .H. NooR
CONSUMERS, PRODUCERS, AND THE EFFICIENCY OF MARKETS
Micro economics
Welfare economics is the study of how the allocation of resources affects economic well-being.
The equilibrium of supply and demand in a market maximizes the total benefits received by buyers and sellers.
The study of welfare economics explains the earlier studied one of the principles of economies that markets are usually a good way to organize economic activity.
The price that balances the supply and demand for a product is the best one because it maximizes the total welfare of consumers and producers.
Chains of Reasoning (Economics) Elasticity and Indirect Taxestutor2u
The incidence of a tax refers to who eventually pays a tax. An indirect tax on producers increases their costs and this will lead to an inward shift of the supply curve. Once the tax is imposed, suppliers may then chose to pass on the tax to consumers by raising their selling price. This depends on the coefficient of price elasticity of demand.
When demand is inelastic (i.e. Ped<1), then most of the tax can be passed on. This is because consumers are less sensitive to price changes, e.g. a 20% increase in price might only lead to a 5% contraction in demand. However, when demand is price elastic (i.e. Ped>1), then most of the incidence of a tax is absorbed by the producer. In this situation, only a small proportion of the tax will be paid by the consumer.
The incidence of an indirect tax also depends on the coefficient of price elasticity of supply.
When supply is perfectly elastic (i.e. Pes= infinity) this means that output can be supplied at constant cost. A tax on producers again causes an inward shift of the supply curve. But in this situation, all of the tax will be paid by the consumer, regardless of the coefficient of PED. When demand is elastic, the consumer pays all of the tax, but equilibrium quantity will contract by a large amount.
CONSUMERS, PRODUCERS, AND THE EFFICIENCY OF MARKETSFaHaD .H. NooR
CONSUMERS, PRODUCERS, AND THE EFFICIENCY OF MARKETS
Micro economics
Welfare economics is the study of how the allocation of resources affects economic well-being.
The equilibrium of supply and demand in a market maximizes the total benefits received by buyers and sellers.
The study of welfare economics explains the earlier studied one of the principles of economies that markets are usually a good way to organize economic activity.
The price that balances the supply and demand for a product is the best one because it maximizes the total welfare of consumers and producers.
Chains of Reasoning (Economics) Elasticity and Indirect Taxestutor2u
The incidence of a tax refers to who eventually pays a tax. An indirect tax on producers increases their costs and this will lead to an inward shift of the supply curve. Once the tax is imposed, suppliers may then chose to pass on the tax to consumers by raising their selling price. This depends on the coefficient of price elasticity of demand.
When demand is inelastic (i.e. Ped<1), then most of the tax can be passed on. This is because consumers are less sensitive to price changes, e.g. a 20% increase in price might only lead to a 5% contraction in demand. However, when demand is price elastic (i.e. Ped>1), then most of the incidence of a tax is absorbed by the producer. In this situation, only a small proportion of the tax will be paid by the consumer.
The incidence of an indirect tax also depends on the coefficient of price elasticity of supply.
When supply is perfectly elastic (i.e. Pes= infinity) this means that output can be supplied at constant cost. A tax on producers again causes an inward shift of the supply curve. But in this situation, all of the tax will be paid by the consumer, regardless of the coefficient of PED. When demand is elastic, the consumer pays all of the tax, but equilibrium quantity will contract by a large amount.
Chapter 07 Managerial Planning and Goal SettingRayman Soe
Richard L. Daft addresses themes and issues directly relevant to both the everyday demands and significant challenges facing businesses today. Comprehensive coverage helps develop managers able to look beyond traditional techniques and ideas to tap into a full breadth of management skills. With the best in proven management and new competencies that harness creativity, D.A.F.T. is Management!
Demand and Supply Analysis (Economics) Lecture NotesFellowBuddy.com
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1.4 Demand, Supply, and EquilibriumUniversity of Miami1.docxchristiandean12115
1.4 Demand, Supply, and Equilibrium
University of Miami
1
4 Demand, Supply, and Equilibrium
Chapter Outline
1. Markets
2. How Do Buyers Behave?
3. How Do Sellers Behave?
4. Supply and Demand in Equilibrium
5. What Would Happen if the Government Tried to Dictate the Price of Gasoline?
6. Elasticity
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1. Markets
A market is a group of economic agents who are trading a good or service, and the rules and arrangements for trading.
The market price is the price at which buyers and sellers conduct transactions.
In a Perfectly Competitive Market:
All the sellers sell an identical good/service
Any individual buyer or any individual seller isn’t powerful enough on his or her own to affect the market price (Price--takers).
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3
Very few markets are perfectly competitive.
Many markets are nearly perfectly competitive.
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4
1. Markets
2. How do Buyers Behave?
We study the behavior of price-taker buyers.
Quantity Demanded: Amount of a good that buyers are willing to purchase at a given price.
Demand Schedule: A table that reports the quantity demanded at different prices, holding all else equal.
Holding all else equal implies that everything else in the economy is held constant. The Latin phrase ceteris paribus means “with other things the same.”
Demand Curve: Plots the quantity demanded at different prices. Plots the demand schedule.
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2. How do Buyers Behave?
The demand curve has an important property
Law of Demand: the quantity demanded is negatively related with the price (holding all else equal).
Willingness to pay: is the highest price that a buyer is willing to pay for an extra unit of the good.
Diminishing Marginal Benefit: As you consume more of a good, your willingness to pay for an additional unit declines.
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2. How do Buyers Behave?
Market Demand Curve: The sum of the individual demand curves of all the potential buyers. The market demand curve plots the relationship between the total quantity demanded and the market price, holding all else equal.
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2. How do Buyers Behave?
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2. How do Buyers Behave?
Exhibit 4.3 Market Demand Curve for Oil
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2. How do Buyers Behave?
Shifts of the Demand Curve
Tastes and preferences
Income and wealth
Availability and prices of related goods
Number and scale of buyers
Buyers’ expectations about the future
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2. How do Buyers Behave?
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2. How do Buyers Behave?
Demand curve shifts only when the quantity demanded changes at a given price.
If a good’s price changes and its demand curve hasn’t shifted, the own price change produces a movement along the demand curve.
Hence: “shift of the demand curve” vs “movement along the demand curve”.
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2. How do Buyers Behave?
Tastes and preferences: e.g. willingness to buy oil products decreases as a.
Business Economics - Unit-2 for IMBA, Osmania UniversityBalasri Kamarapu
DEMAND CONCEPTS & ELASTICITY OF DEMAND :
Concept of Demand
Determinants of Demand
Law of Demand
Exception to the law of demand
Elasticity of Demand
Types of demand elasticity
Uses of demand elasticity
Concept of Supply
Determinants of Supply
Law of Supply
Elasticity of Supply
Certified College and Universities in United Statesdjalex035
ICE SEVP Certified Schools
This institutions are officially accredited from Authorities of United States of America.
International Students have to Choose their school from here.
Marketing strategy and_competitive_positioning
ALL THE RIGHTS ARE RESERVED BY WRITER
Courtesy: Writer & Publisher
Marketing strategy and_competitive_positioning
Currently pi network is not tradable on binance or any other exchange because we are still in the enclosed mainnet.
Right now the only way to sell pi coins is by trading with a verified merchant.
What is a pi merchant?
A pi merchant is someone verified by pi network team and allowed to barter pi coins for goods and services.
Since pi network is not doing any pre-sale The only way exchanges like binance/huobi or crypto whales can get pi is by buying from miners. And a merchant stands in between the exchanges and the miners.
I will leave the telegram contact of my personal pi merchant. I and my friends has traded more than 6000pi coins successfully
Tele-gram
@Pi_vendor_247
how to sell pi coins in all Africa Countries.DOT TECH
Yes. You can sell your pi network for other cryptocurrencies like Bitcoin, usdt , Ethereum and other currencies And this is done easily with the help from a pi merchant.
What is a pi merchant ?
Since pi is not launched yet in any exchange. The only way you can sell right now is through merchants.
A verified Pi merchant is someone who buys pi network coins from miners and resell them to investors looking forward to hold massive quantities of pi coins before mainnet launch in 2026.
I will leave the telegram contact of my personal pi merchant to trade with.
@Pi_vendor_247
how to sell pi coins at high rate quickly.DOT TECH
Where can I sell my pi coins at a high rate.
Pi is not launched yet on any exchange. But one can easily sell his or her pi coins to investors who want to hold pi till mainnet launch.
This means crypto whales want to hold pi. And you can get a good rate for selling pi to them. I will leave the telegram contact of my personal pi vendor below.
A vendor is someone who buys from a miner and resell it to a holder or crypto whale.
Here is the telegram contact of my vendor:
@Pi_vendor_247
how to sell pi coins on Bitmart crypto exchangeDOT TECH
Yes. Pi network coins can be exchanged but not on bitmart exchange. Because pi network is still in the enclosed mainnet. The only way pioneers are able to trade pi coins is by reselling the pi coins to pi verified merchants.
A verified merchant is someone who buys pi network coins and resell it to exchanges looking forward to hold till mainnet launch.
I will leave the telegram contact of my personal pi merchant to trade with.
@Pi_vendor_247
how can I sell my pi coins for cash in a pi APPDOT TECH
You can't sell your pi coins in the pi network app. because it is not listed yet on any exchange.
The only way you can sell is by trading your pi coins with an investor (a person looking forward to hold massive amounts of pi coins before mainnet launch) .
You don't need to meet the investor directly all the trades are done with a pi vendor/merchant (a person that buys the pi coins from miners and resell it to investors)
I Will leave The telegram contact of my personal pi vendor, if you are finding a legitimate one.
@Pi_vendor_247
#pi network
#pi coins
#money
what is the future of Pi Network currency.DOT TECH
The future of the Pi cryptocurrency is uncertain, and its success will depend on several factors. Pi is a relatively new cryptocurrency that aims to be user-friendly and accessible to a wide audience. Here are a few key considerations for its future:
Message: @Pi_vendor_247 on telegram if u want to sell PI COINS.
1. Mainnet Launch: As of my last knowledge update in January 2022, Pi was still in the testnet phase. Its success will depend on a successful transition to a mainnet, where actual transactions can take place.
2. User Adoption: Pi's success will be closely tied to user adoption. The more users who join the network and actively participate, the stronger the ecosystem can become.
3. Utility and Use Cases: For a cryptocurrency to thrive, it must offer utility and practical use cases. The Pi team has talked about various applications, including peer-to-peer transactions, smart contracts, and more. The development and implementation of these features will be essential.
4. Regulatory Environment: The regulatory environment for cryptocurrencies is evolving globally. How Pi navigates and complies with regulations in various jurisdictions will significantly impact its future.
5. Technology Development: The Pi network must continue to develop and improve its technology, security, and scalability to compete with established cryptocurrencies.
6. Community Engagement: The Pi community plays a critical role in its future. Engaged users can help build trust and grow the network.
7. Monetization and Sustainability: The Pi team's monetization strategy, such as fees, partnerships, or other revenue sources, will affect its long-term sustainability.
It's essential to approach Pi or any new cryptocurrency with caution and conduct due diligence. Cryptocurrency investments involve risks, and potential rewards can be uncertain. The success and future of Pi will depend on the collective efforts of its team, community, and the broader cryptocurrency market dynamics. It's advisable to stay updated on Pi's development and follow any updates from the official Pi Network website or announcements from the team.
Even tho Pi network is not listed on any exchange yet.
Buying/Selling or investing in pi network coins is highly possible through the help of vendors. You can buy from vendors[ buy directly from the pi network miners and resell it]. I will leave the telegram contact of my personal vendor.
@Pi_vendor_247
USDA Loans in California: A Comprehensive Overview.pptxmarketing367770
USDA Loans in California: A Comprehensive Overview
If you're dreaming of owning a home in California's rural or suburban areas, a USDA loan might be the perfect solution. The U.S. Department of Agriculture (USDA) offers these loans to help low-to-moderate-income individuals and families achieve homeownership.
Key Features of USDA Loans:
Zero Down Payment: USDA loans require no down payment, making homeownership more accessible.
Competitive Interest Rates: These loans often come with lower interest rates compared to conventional loans.
Flexible Credit Requirements: USDA loans have more lenient credit score requirements, helping those with less-than-perfect credit.
Guaranteed Loan Program: The USDA guarantees a portion of the loan, reducing risk for lenders and expanding borrowing options.
Eligibility Criteria:
Location: The property must be located in a USDA-designated rural or suburban area. Many areas in California qualify.
Income Limits: Applicants must meet income guidelines, which vary by region and household size.
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Application Process:
Find a USDA-Approved Lender: Not all lenders offer USDA loans, so it's essential to choose one approved by the USDA.
Pre-Qualification: Determine your eligibility and the amount you can borrow.
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USDA loans are an excellent option for those looking to buy a home in California's rural and suburban areas. With no down payment and flexible requirements, these loans make homeownership more attainable for many families. Explore your eligibility today and take the first step toward owning your dream home.
Empowering the Unbanked: The Vital Role of NBFCs in Promoting Financial Inclu...Vighnesh Shashtri
In India, financial inclusion remains a critical challenge, with a significant portion of the population still unbanked. Non-Banking Financial Companies (NBFCs) have emerged as key players in bridging this gap by providing financial services to those often overlooked by traditional banking institutions. This article delves into how NBFCs are fostering financial inclusion and empowering the unbanked.
US Economic Outlook - Being Decided - M Capital Group August 2021.pdfpchutichetpong
The U.S. economy is continuing its impressive recovery from the COVID-19 pandemic and not slowing down despite re-occurring bumps. The U.S. savings rate reached its highest ever recorded level at 34% in April 2020 and Americans seem ready to spend. The sectors that had been hurt the most by the pandemic specifically reduced consumer spending, like retail, leisure, hospitality, and travel, are now experiencing massive growth in revenue and job openings.
Could this growth lead to a “Roaring Twenties”? As quickly as the U.S. economy contracted, experiencing a 9.1% drop in economic output relative to the business cycle in Q2 2020, the largest in recorded history, it has rebounded beyond expectations. This surprising growth seems to be fueled by the U.S. government’s aggressive fiscal and monetary policies, and an increase in consumer spending as mobility restrictions are lifted. Unemployment rates between June 2020 and June 2021 decreased by 5.2%, while the demand for labor is increasing, coupled with increasing wages to incentivize Americans to rejoin the labor force. Schools and businesses are expected to fully reopen soon. In parallel, vaccination rates across the country and the world continue to rise, with full vaccination rates of 50% and 14.8% respectively.
However, it is not completely smooth sailing from here. According to M Capital Group, the main risks that threaten the continued growth of the U.S. economy are inflation, unsettled trade relations, and another wave of Covid-19 mutations that could shut down the world again. Have we learned from the past year of COVID-19 and adapted our economy accordingly?
“In order for the U.S. economy to continue growing, whether there is another wave or not, the U.S. needs to focus on diversifying supply chains, supporting business investment, and maintaining consumer spending,” says Grace Feeley, a research analyst at M Capital Group.
While the economic indicators are positive, the risks are coming closer to manifesting and threatening such growth. The new variants spreading throughout the world, Delta, Lambda, and Gamma, are vaccine-resistant and muddy the predictions made about the economy and health of the country. These variants bring back the feeling of uncertainty that has wreaked havoc not only on the stock market but the mindset of people around the world. MCG provides unique insight on how to mitigate these risks to possibly ensure a bright economic future.
how to swap pi coins to foreign currency withdrawable.DOT TECH
As of my last update, Pi is still in the testing phase and is not tradable on any exchanges.
However, Pi Network has announced plans to launch its Testnet and Mainnet in the future, which may include listing Pi on exchanges.
The current method for selling pi coins involves exchanging them with a pi vendor who purchases pi coins for investment reasons.
If you want to sell your pi coins, reach out to a pi vendor and sell them to anyone looking to sell pi coins from any country around the globe.
Below is the contact information for my personal pi vendor.
Telegram: @Pi_vendor_247
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2. Mankiw et al.: Principles of Microeconomics, 2nd Canadian edition. Chapter 4: Page 2
In this chapter you will…In this chapter you will…
• Learn the nature of a competitive market.
• Examine what determines the demand for
a good in a competitive market.
• Examine what determines the supply of a
good in a competitive market.
• See how supply and demand together set
the price of a good and the quantity sold.
• Consider the key role of prices in
allocating scarce resources.
• Learn the nature of a competitive market.
• Examine what determines the demand for
a good in a competitive market.
• Examine what determines the supply of a
good in a competitive market.
• See how supply and demand together set
the price of a good and the quantity sold.
• Consider the key role of prices in
allocating scarce resources.
3. Mankiw et al.: Principles of Microeconomics, 2nd Canadian edition. Chapter 4: Page 3
THE MARKET FORCES OFTHE MARKET FORCES OF
SUPPLY AND DEMANDSUPPLY AND DEMAND
• SupplySupply and Demand are the two
words that economists use most
often.
• Supply and Demand are the forces
that make market economies work!
• Modern microeconomics is about
supply, demand, and market
equilibrium.
• SupplySupply and Demand are the two
words that economists use most
often.
• Supply and Demand are the forces
that make market economies work!
• Modern microeconomics is about
supply, demand, and market
equilibrium.
4. Mankiw et al.: Principles of Microeconomics, 2nd Canadian edition. Chapter 4: Page 4
MARKETS AND COMPETITIONMARKETS AND COMPETITION
• The terms supply and demand refer
to the behaviour of people. . .
• . . .as they interact with one another
in markets.
• A market is a group of buyers and sellers
of a particular good or service.
– Buyers determine demand...
– Sellers determine supply…
• The terms supply and demand refer
to the behaviour of people. . .
• . . .as they interact with one another
in markets.
• A market is a group of buyers and sellers
of a particular good or service.
– Buyers determine demand...
– Sellers determine supply…
5. Mankiw et al.: Principles of Microeconomics, 2nd Canadian edition. Chapter 4: Page 5
Competitive MarketsCompetitive Markets
• A Competitive Market is a market
with many buyers and sellers so that
each has a negligible impact on the
market price.
• A Competitive Market is a market
with many buyers and sellers so that
each has a negligible impact on the
market price.
6. Mankiw et al.: Principles of Microeconomics, 2nd Canadian edition. Chapter 4: Page 6
Competition: Perfect or OtherwiseCompetition: Perfect or Otherwise
Perfectly Competitive:
Homogeneous Products
Buyers and Sellers are Price Takers
Monopoly:
One Seller, controls price
Oligopoly:
Few Sellers, not aggressive competition
Monopolistic Competition:
Many Sellers, differentiated products
Perfectly Competitive:
Homogeneous Products
Buyers and Sellers are Price Takers
Monopoly:
One Seller, controls price
Oligopoly:
Few Sellers, not aggressive competition
Monopolistic Competition:
Many Sellers, differentiated products
7. Mankiw et al.: Principles of Microeconomics, 2nd Canadian edition. Chapter 4: Page 7
DEMANDDEMAND
• Quantity Demanded refers to the
amount (quantity) of a good that
buyers are willing to purchase at
alternative prices for a given period.
• Quantity Demanded refers to the
amount (quantity) of a good that
buyers are willing to purchase at
alternative prices for a given period.
8. Mankiw et al.: Principles of Microeconomics, 2nd Canadian edition. Chapter 4: Page 8
Determinants of DemandDeterminants of Demand
• What factors determine how much ice
cream you will buy?
• What factors determine how much you
will really purchase?
1) Product’s Own Price
2) Consumer Income
3) Prices of Related Goods
4) Tastes
5) Expectations
6) Number of Consumers
• What factors determine how much ice
cream you will buy?
• What factors determine how much you
will really purchase?
1) Product’s Own Price
2) Consumer Income
3) Prices of Related Goods
4) Tastes
5) Expectations
6) Number of Consumers
9. Mankiw et al.: Principles of Microeconomics, 2nd Canadian edition. Chapter 4: Page 9
1) Price1) Price
Law of Demand
– The law of demand states that,
other things equal, the quantity
demanded of a good falls when
the price of the good rises.
Law of Demand
– The law of demand states that,
other things equal, the quantity
demanded of a good falls when
the price of the good rises.
10. Mankiw et al.: Principles of Microeconomics, 2nd Canadian edition. Chapter 4: Page 10
2) Income2) Income
• As income increases the
demand for a normal good will
increase.
• As income increases the
demand for an inferior good will
decrease.
• As income increases the
demand for a normal good will
increase.
• As income increases the
demand for an inferior good will
decrease.
11. Mankiw et al.: Principles of Microeconomics, 2nd Canadian edition. Chapter 4: Page 11
3) Prices of Related Goods3) Prices of Related Goods
Prices of Related Goods
– When a fall in the price of one
good reduces the demand for
another good, the two goods are
called substitutes.
– When a fall in the price of one
good increases the demand for
another good, the two goods are
called complements.
Prices of Related Goods
– When a fall in the price of one
good reduces the demand for
another good, the two goods are
called substitutes.
– When a fall in the price of one
good increases the demand for
another good, the two goods are
called complements.
12. Mankiw et al.: Principles of Microeconomics, 2nd Canadian edition. Chapter 4: Page 12
4) Others4) Others
• Tastes
• Expectations
• Tastes
• Expectations
13. Mankiw et al.: Principles of Microeconomics, 2nd Canadian edition. Chapter 4: Page 13
The Demand Schedule and theThe Demand Schedule and the
Demand CurveDemand Curve
The demand schedule is a table that
shows the relationship between the
price of the good and the quantity
demanded.
The demand curve is a graph of the
relationship between the price of a
good and the quantity demanded.
Ceteris Paribus: “Other thing being
equal”
The demand schedule is a table that
shows the relationship between the
price of the good and the quantity
demanded.
The demand curve is a graph of the
relationship between the price of a
good and the quantity demanded.
Ceteris Paribus: “Other thing being
equal”
14. Mankiw et al.: Principles of Microeconomics, 2nd Canadian edition. Chapter 4: Page 14
Table 4-1: Catherine’s Demand ScheduleTable 4-1: Catherine’s Demand Schedule
03.00
22.50
42.00
61.50
81.00
100.50
120.00
Quantity of cones
Demanded
Price of Ice-cream
Cone ($)
15. Mankiw et al.: Principles of Microeconomics, 2nd Canadian edition. Chapter 4: Page 15
Figure 4-1: Catherine’s Demand CurveFigure 4-1: Catherine’s Demand Curve
Price of Ice-
Cream
Cone
Quantity of
Ice-Cream
Cones
2 4 6 8 10 120
$3.00
2.50
2.00
1.50
1.00
0.50
16. Mankiw et al.: Principles of Microeconomics, 2nd Canadian edition. Chapter 4: Page 16
Market Demand ScheduleMarket Demand Schedule
• Market demand is the sum of all individual
demands at each possible price.
• Graphically, individual demand curves are
summed horizontally to obtain the market
demand curve.
• Assume the ice cream market has two
buyers as follows…
• Market demand is the sum of all individual
demands at each possible price.
• Graphically, individual demand curves are
summed horizontally to obtain the market
demand curve.
• Assume the ice cream market has two
buyers as follows…
17. Mankiw et al.: Principles of Microeconomics, 2nd Canadian edition. Chapter 4: Page 17
03.00
100.50
120.00
Catherine
Price of Ice-cream
Cone ($)
Table 4-2: Market demand as the Sum ofTable 4-2: Market demand as the Sum of
Individual DemandsIndividual Demands
+
1
6
7
Nicholas
1
22.50
42.00
61.50
81.00
2
3
4
5
4
7
10
13
16
19
Market
=
18. Mankiw et al.: Principles of Microeconomics, 2nd Canadian edition. Chapter 4: Page 18
Price of Ice-
Cream
Cone
Quantity of
Ice-Cream
Cones
D3
D1
D2
Decrease
in demand
Increase
in demand
Figure 4-3: Shifts in the Demand CurveFigure 4-3: Shifts in the Demand Curve
19. Mankiw et al.: Principles of Microeconomics, 2nd Canadian edition. Chapter 4: Page 19
Table 4-3: The Determinants of QuantityTable 4-3: The Determinants of Quantity
DemandedDemanded
20. Mankiw et al.: Principles of Microeconomics, 2nd Canadian edition. Chapter 4: Page 20
Shifts in the Demand CurveShifts in the Demand Curve versusversus
Movements Along the Demand CurveMovements Along the Demand Curve
21. Mankiw et al.: Principles of Microeconomics, 2nd Canadian edition. Chapter 4: Page 21
Price of
Cigarettes,
per Pack.
Number of Cigarettes
Smoked per Day
D2
A policy to discourage
smoking shifts the demand
curve to the left.
0 20
$2.00
D1
A
10
B
Figure 4-4 a): A Shifts in the Demand CurveFigure 4-4 a): A Shifts in the Demand Curve
22. Mankiw et al.: Principles of Microeconomics, 2nd Canadian edition. Chapter 4: Page 22
Price of
Cigarettes,
per Pack.
Number of Cigarettes
Smoked per Day
0 20
$2.00
D1
A
A tax that raises the price
of cigarettes results in a
movements along the
demand curve.
C
12
$4.00
Figure 4-4 b): A Movement Along theFigure 4-4 b): A Movement Along the
Demand CurveDemand Curve
23. Mankiw et al.: Principles of Microeconomics, 2nd Canadian edition. Chapter 4: Page 23
SUPPLYSUPPLY
• Quantity Supplied refers to the
amount (quantity) of a good that
sellers are willing to make available
for sale at alternative prices for a
given period.
• Quantity Supplied refers to the
amount (quantity) of a good that
sellers are willing to make available
for sale at alternative prices for a
given period.
24. Mankiw et al.: Principles of Microeconomics, 2nd Canadian edition. Chapter 4: Page 24
Determinants of SupplyDeterminants of Supply
• What factors determine how much
ice cream you are willing to offer or
produce?
1) Product’s Own Price
2) Input prices
3) Technology
4) Expectations
5) Number of sellers
• What factors determine how much
ice cream you are willing to offer or
produce?
1) Product’s Own Price
2) Input prices
3) Technology
4) Expectations
5) Number of sellers
25. Mankiw et al.: Principles of Microeconomics, 2nd Canadian edition. Chapter 4: Page 25
1) Price1) Price
Law of Supply
– The law of supply states that,
other things equal, the quantity
supplied of a good rises when the
price of the good rises.
Law of Supply
– The law of supply states that,
other things equal, the quantity
supplied of a good rises when the
price of the good rises.
26. Mankiw et al.: Principles of Microeconomics, 2nd Canadian edition. Chapter 4: Page 26
The Supply Schedule and theThe Supply Schedule and the
Supply CurveSupply Curve
The supply schedule is a table that
shows the relationship between the
price of the good and the quantity
supplied.
The supply curve is a graph of the
relationship between the price of a
good and the quantity supplied.
Ceteris Paribus: “Other thing being
equal”
The supply schedule is a table that
shows the relationship between the
price of the good and the quantity
supplied.
The supply curve is a graph of the
relationship between the price of a
good and the quantity supplied.
Ceteris Paribus: “Other thing being
equal”
27. Mankiw et al.: Principles of Microeconomics, 2nd Canadian edition. Chapter 4: Page 27
Table 4-4: Ben’s Supply ScheduleTable 4-4: Ben’s Supply Schedule
53.00
42.50
32.00
21.50
11.00
00.50
00.00
Quantity of cones
Supplied
Price of Ice-cream
Cone ($)
28. Mankiw et al.: Principles of Microeconomics, 2nd Canadian edition. Chapter 4: Page 28
Price of Ice-
Cream
Cone
Quantity of
Ice-Cream
Cones
6 8 10 120 2
1.50
1.00
1
2.00
3 4
$3.00
2.50
5
0.50
Figure 4-5: Ben’s Supply CurveFigure 4-5: Ben’s Supply Curve
29. Mankiw et al.: Principles of Microeconomics, 2nd Canadian edition. Chapter 4: Page 29
Market Supply ScheduleMarket Supply Schedule
• Market supply is the sum of all individual
supplies at each possible price.
• Graphically, individual supply curves are
summed horizontally to obtain the market
demand curve.
• Assume the ice cream market has two
suppliers as follows…
• Market supply is the sum of all individual
supplies at each possible price.
• Graphically, individual supply curves are
summed horizontally to obtain the market
demand curve.
• Assume the ice cream market has two
suppliers as follows…
30. Mankiw et al.: Principles of Microeconomics, 2nd Canadian edition. Chapter 4: Page 30
53.00
00.50
00.00
Ben
Price of Ice-cream
Cone ($)
Table 4-5: Market supply as the Sum ofTable 4-5: Market supply as the Sum of
Individual SuppliesIndividual Supplies
+
8
0
0
Nicholas
13
42.50
32.00
21.50
11.00
6
4
2
0
10
7
4
1
0
0
Market
=
31. Mankiw et al.: Principles of Microeconomics, 2nd Canadian edition. Chapter 4: Page 31
Price of Ice-
Cream
Cone
Quantity of
Ice-Cream
Cones
S3
S2
S1
Decrease
in supply
Increase
in supply
Figure 4-7: Shifts in the Supply CurveFigure 4-7: Shifts in the Supply Curve
32. Mankiw et al.: Principles of Microeconomics, 2nd Canadian edition. Chapter 4: Page 32
Table 4-6: The Determinants of QuantityTable 4-6: The Determinants of Quantity
SuppliedSupplied
33. Mankiw et al.: Principles of Microeconomics, 2nd Canadian edition. Chapter 4: Page 33
SUPPLY AND DEMANDSUPPLY AND DEMAND
TOGETHERTOGETHER
• Equilibrium refers to a situation in which
the price has reached the level where
quantity supplied equals quantity
demanded.
• Equilibrium refers to a situation in which
the price has reached the level where
quantity supplied equals quantity
demanded.
34. Mankiw et al.: Principles of Microeconomics, 2nd Canadian edition. Chapter 4: Page 34
EquilibriumEquilibrium
• Equilibrium Price
– The price that balances quantity supplied and
quantity demanded.
– On a graph, it is the price at which the supply
and demand curves intersect.
• Equilibrium Quantity
– The quantity supplied and the quantity
demanded at the equilibrium price.
– On a graph it is the quantity at which the
supply and demand curves intersect.
• Equilibrium Price
– The price that balances quantity supplied and
quantity demanded.
– On a graph, it is the price at which the supply
and demand curves intersect.
• Equilibrium Quantity
– The quantity supplied and the quantity
demanded at the equilibrium price.
– On a graph it is the quantity at which the
supply and demand curves intersect.
35. Mankiw et al.: Principles of Microeconomics, 2nd Canadian edition. Chapter 4: Page 35
At $2.00, the quantity demanded
is equal to the quantity supplied!
Demand
Schedule
Supply Schedule
EquilibriumEquilibrium
36. Mankiw et al.: Principles of Microeconomics, 2nd Canadian edition. Chapter 4: Page 36
Equilibrium price
Demand
Supply
$2.00
6 8 100
Equilibrium
Equilibrium quantity
Quantity of Ice-
Cream Cones
Price of
Ice-Cream
Cone
421 3 5 7 9 11
Figure 4-8: The Equilibrium of Supply andFigure 4-8: The Equilibrium of Supply and
DemandDemand
37. Mankiw et al.: Principles of Microeconomics, 2nd Canadian edition. Chapter 4: Page 37
EquilibriumEquilibrium
• Surplus
– When price > equilibrium price, then quantity
supplied > quantity demanded.
• There is excess supply or a surplus.
• Suppliers will lower the price to increase sales,
thereby moving toward equilibrium.
• Shortage
– When price < equilibrium price, then quantity
demanded > the quantity supplied.
• There is excess demand or a shortage.
• Suppliers will raise the price due to too many buyers
chasing too few goods, thereby moving toward
equilibrium.
• Surplus
– When price > equilibrium price, then quantity
supplied > quantity demanded.
• There is excess supply or a surplus.
• Suppliers will lower the price to increase sales,
thereby moving toward equilibrium.
• Shortage
– When price < equilibrium price, then quantity
demanded > the quantity supplied.
• There is excess demand or a shortage.
• Suppliers will raise the price due to too many buyers
chasing too few goods, thereby moving toward
equilibrium.
38. Mankiw et al.: Principles of Microeconomics, 2nd Canadian edition. Chapter 4: Page 38
Demand
Supply
$2.00
6 8 100 Quantity of Ice-
Cream Cones
Price of
Ice-Cream
Cone
421 3 5 7 9 11
$2.50
Surplus
Quantity
Demanded
Quantity
Supplied
Figure 4-9 a): Excess SupplyFigure 4-9 a): Excess Supply
39. Mankiw et al.: Principles of Microeconomics, 2nd Canadian edition. Chapter 4: Page 39
Demand
Supply
$2.00
6 8 100 Quantity of Ice-
Cream Cone
Price of
Ice-Cream
Cone
421 3 5 7 9 11
$1.50
Shortage
Quantity
Supplied
Quantity
Demanded
Figure 4-9 b): Excess DemandFigure 4-9 b): Excess Demand
40. Mankiw et al.: Principles of Microeconomics, 2nd Canadian edition. Chapter 4: Page 40
Three Steps To AnalyzingThree Steps To Analyzing
Changes in EquilibriumChanges in Equilibrium
• Decide whether the event shifts the
supply or demand curve (or both).
• Decide whether the curve(s) shift(s)
to the left or to the right.
• Use the supply-and-demand diagram
to see how the shift affects
equilibrium price and quantity.
• Example: A Heat Wave
• Decide whether the event shifts the
supply or demand curve (or both).
• Decide whether the curve(s) shift(s)
to the left or to the right.
• Use the supply-and-demand diagram
to see how the shift affects
equilibrium price and quantity.
• Example: A Heat Wave
41. Mankiw et al.: Principles of Microeconomics, 2nd Canadian edition. Chapter 4: Page 41
D1
Supply
$2.00
6 100 Quantity of Ice-
Cream Cone
Price of
Ice-Cream
Cone
421 3 5 7 11
D2
$2.50
1. Hot weather increases the
demand for ice cream…
2. …
resulting in
a higher
price …
3. … and a higher quantity
sold.
New equilibrium
Initial
equilibrium
Figure 4-10: How an Increase DemandFigure 4-10: How an Increase Demand
Affects the EquilibriumAffects the Equilibrium
42. Mankiw et al.: Principles of Microeconomics, 2nd Canadian edition. Chapter 4: Page 42
Demand
S1
$2.00
100 Quantity of Ice-
Cream Cones
Price of
Ice-Cream
Cone
421 3 7 11
S2
$2.50
1. An earthquake reduces the
supply of ice cream…
2. …
resulting in
a higher
price …
3. … and a lower quantity
sold.
New equilibrium
Initial equilibrium
Figure 4-11: How a Decrease DemandFigure 4-11: How a Decrease Demand
Affects the EquilibriumAffects the Equilibrium
43. Mankiw et al.: Principles of Microeconomics, 2nd Canadian edition. Chapter 4: Page 43
D1
S1
0 Quantity of Ice-
Cream Cone
Price of
Ice-Cream
Cone
Q1
D2
Large increase
in demand
P2
S2
Q2
New
equilibrium
Small
decrease in
supply
Initial equilibrium
P1
Figure 4-12 a): A Shift in Both Supply andFigure 4-12 a): A Shift in Both Supply and
DemandDemand
44. Mankiw et al.: Principles of Microeconomics, 2nd Canadian edition. Chapter 4: Page 44
D1
S1
0 Quantity of Ice-
Cream Cone
Price of
Ice-Cream
Cone
Q1
D2
Large
decrease in
supply
P2
S2
Q2
New
equilibrium
Small increase
in demand
Initial equilibriumP1
Figure 4-12 b): A Shift in Both Supply andFigure 4-12 b): A Shift in Both Supply and
DemandDemand
45. Mankiw et al.: Principles of Microeconomics, 2nd Canadian edition. Chapter 4: Page 45
Table 4-8: What Happens to Price andTable 4-8: What Happens to Price and
Quantity when Supply or Demand ShiftsQuantity when Supply or Demand Shifts
46. Mankiw et al.: Principles of Microeconomics, 2nd Canadian edition. Chapter 4: Page 46
Concluding Remarks…Concluding Remarks…
• Market economies harness the
forces of supply and demand. . .
• Supply and Demand together
determine the prices of the
economy’s different goods and
services. . .
• Prices in turn are the signals that
guide the allocation of resources.
• Market economies harness the
forces of supply and demand. . .
• Supply and Demand together
determine the prices of the
economy’s different goods and
services. . .
• Prices in turn are the signals that
guide the allocation of resources.
47. Mankiw et al.: Principles of Microeconomics, 2nd Canadian edition. Chapter 4: Page 47
SummarySummary
• Economists use the model of supply and
demand to analyze competitive markets.
• In a competitive market, there are many
buyers and sellers, each of whom has little
or no influence on the market price.
• Economists use the model of supply and
demand to analyze competitive markets.
• In a competitive market, there are many
buyers and sellers, each of whom has little
or no influence on the market price.
48. Mankiw et al.: Principles of Microeconomics, 2nd Canadian edition. Chapter 4: Page 48
SummarySummary
• The demand curve shows how the
quantity of a good depends upon the
price.
– According to the law of demand, as the price
of a good falls, the quantity demanded rises.
Therefore, the demand curve slopes
downward.
– In addition to price, other determinants of how
much consumers want to buy include income,
the prices of complements and substitutes,
tastes, expectations, and the number of
buyers.
– If one of these factors changes, the demand
curve shifts.
• The demand curve shows how the
quantity of a good depends upon the
price.
– According to the law of demand, as the price
of a good falls, the quantity demanded rises.
Therefore, the demand curve slopes
downward.
– In addition to price, other determinants of how
much consumers want to buy include income,
the prices of complements and substitutes,
tastes, expectations, and the number of
buyers.
– If one of these factors changes, the demand
curve shifts.
49. Mankiw et al.: Principles of Microeconomics, 2nd Canadian edition. Chapter 4: Page 49
SummarySummary
• The supply curve shows how the quantity of a
good supplied depends upon the price.
– According to the law of supply, as the price of
a good rises, the quantity supplied rises.
Therefore, the supply curve slopes upward.
– In addition to price, other determinants of how
much producers want to sell include input
prices, technology, expectations, and the
number of sellers.
– If one of these factors changes, the supply
curve shifts.
• The supply curve shows how the quantity of a
good supplied depends upon the price.
– According to the law of supply, as the price of
a good rises, the quantity supplied rises.
Therefore, the supply curve slopes upward.
– In addition to price, other determinants of how
much producers want to sell include input
prices, technology, expectations, and the
number of sellers.
– If one of these factors changes, the supply
curve shifts.
50. Mankiw et al.: Principles of Microeconomics, 2nd Canadian edition. Chapter 4: Page 50
SummarySummary
• Market equilibrium is determined by the
intersection of the supply and demand
curves.
• At the equilibrium price, the quantity
demanded equals the quantity supplied.
• The behavior of buyers and sellers
naturally drives markets toward their
equilibrium.
• Market equilibrium is determined by the
intersection of the supply and demand
curves.
• At the equilibrium price, the quantity
demanded equals the quantity supplied.
• The behavior of buyers and sellers
naturally drives markets toward their
equilibrium.
51. Mankiw et al.: Principles of Microeconomics, 2nd Canadian edition. Chapter 4: Page 51
The EndThe End