The document discusses the economic concepts of supply and demand. It explains that supply and demand determine the equilibrium price in a market where quantity supplied equals quantity demanded. The supply curve slopes upward as quantity supplied increases with price, while the demand curve slopes downward as quantity demanded decreases with price. When the supply and demand curves intersect, they reach equilibrium, with no surplus or shortage. If demand or supply changes, the curves shift and a new equilibrium is established at a different price and quantity.
Fundamental and technical analysis are two techniques used to forecast commodity prices. Fundamental analysis examines underlying economic and political factors that influence supply and demand to predict price movements. It involves gathering data on factors such as inventories, policies, and economic indicators. Technical analysis focuses on historical price and trading volume patterns to identify trends. Traders use various fundamental and technical strategies and analyze risk to successfully manage trading positions.
The theory of price, also known as price theory, is a microeconomic principle that uses the concept of supply and demand to determine the appropriate price point for a good or service. The goal is to achieve equilibrium in which the quantities of goods or services provided match the corresponding market's desire and ability to acquire the good or service. The concept allows for price adjustments as market conditions change.
This document provides an overview of key concepts in microeconomics relating to demand and supply. It defines demand and supply, the laws of demand and supply, and demand and supply curves. It discusses factors that cause changes in quantity demanded and supplied versus shifts in the demand and supply curves. Determinants of demand like income, tastes, prices of related goods, and number of buyers are covered. Determinants of supply such as number of sellers and technology are also outlined. The document concludes with a discussion of equilibrium.
Demand and supply functions in economics vipul nigam
This document provides learning objectives and key concepts about demand, supply, and market equilibrium. It defines key terms like demand, supply, equilibrium price and quantity. It explains how demand and supply curves are determined by various factors and how they intersect at the equilibrium point where quantity demanded equals quantity supplied. It also discusses how shifts in demand or supply curves affect equilibrium price and quantity, and the impacts of price ceilings and floors.
The document discusses the demand curve, supply curve, and how they interact to determine market equilibrium price and quantity. It provides examples of demand and supply schedules, plots the corresponding curves, and explains how they slope according to the laws of demand and supply. It also discusses factors that can cause the curves to shift, and how these shifts affect the new equilibrium point where quantity supplied equals quantity demanded.
The document discusses marginalism and incrementalism, and provides examples to distinguish between the two concepts. It states that marginalism focuses on unit changes in goods created or sold, and how those relate to consumer choice and demand. Incrementalism considers "chunk changes" in more than one independent variable at a time, and is more flexible than marginalism. The document also provides several other distinctions between the two principles.
Basic Economics With Taxation And Agrarian Reform boaraileeanne
The document provides an overview of key topics in consumer behavior and economics, including consumer behavior analysis, demand analysis, supply analysis, market equilibrium, production and cost theories, and market structure. It defines important concepts like utility, demand and supply curves, equilibrium price and quantity, costs of production, and elasticity. Various graphs and tables are presented to illustrate consumer choice concepts like indifference curves, the relationship between total utility and marginal utility, and the determinants of demand and supply.
This document discusses the economic theory of demand. It begins by introducing the concept of demand and what determines demand for a product. Key determinants of demand include price, income, tastes and preferences. The relationship between price and quantity demanded is shown using demand schedules and demand curves. The law of demand states that as price increases, quantity demanded decreases, and vice versa. Demand functions express this relationship mathematically. There are some exceptions to the law of demand. Elasticity measures the responsiveness of demand to changes in price and income. Price elasticity indicates whether demand is elastic, inelastic or unit elastic. Income elasticity also measures responsiveness but to changes in consumer income.
Fundamental and technical analysis are two techniques used to forecast commodity prices. Fundamental analysis examines underlying economic and political factors that influence supply and demand to predict price movements. It involves gathering data on factors such as inventories, policies, and economic indicators. Technical analysis focuses on historical price and trading volume patterns to identify trends. Traders use various fundamental and technical strategies and analyze risk to successfully manage trading positions.
The theory of price, also known as price theory, is a microeconomic principle that uses the concept of supply and demand to determine the appropriate price point for a good or service. The goal is to achieve equilibrium in which the quantities of goods or services provided match the corresponding market's desire and ability to acquire the good or service. The concept allows for price adjustments as market conditions change.
This document provides an overview of key concepts in microeconomics relating to demand and supply. It defines demand and supply, the laws of demand and supply, and demand and supply curves. It discusses factors that cause changes in quantity demanded and supplied versus shifts in the demand and supply curves. Determinants of demand like income, tastes, prices of related goods, and number of buyers are covered. Determinants of supply such as number of sellers and technology are also outlined. The document concludes with a discussion of equilibrium.
Demand and supply functions in economics vipul nigam
This document provides learning objectives and key concepts about demand, supply, and market equilibrium. It defines key terms like demand, supply, equilibrium price and quantity. It explains how demand and supply curves are determined by various factors and how they intersect at the equilibrium point where quantity demanded equals quantity supplied. It also discusses how shifts in demand or supply curves affect equilibrium price and quantity, and the impacts of price ceilings and floors.
The document discusses the demand curve, supply curve, and how they interact to determine market equilibrium price and quantity. It provides examples of demand and supply schedules, plots the corresponding curves, and explains how they slope according to the laws of demand and supply. It also discusses factors that can cause the curves to shift, and how these shifts affect the new equilibrium point where quantity supplied equals quantity demanded.
The document discusses marginalism and incrementalism, and provides examples to distinguish between the two concepts. It states that marginalism focuses on unit changes in goods created or sold, and how those relate to consumer choice and demand. Incrementalism considers "chunk changes" in more than one independent variable at a time, and is more flexible than marginalism. The document also provides several other distinctions between the two principles.
Basic Economics With Taxation And Agrarian Reform boaraileeanne
The document provides an overview of key topics in consumer behavior and economics, including consumer behavior analysis, demand analysis, supply analysis, market equilibrium, production and cost theories, and market structure. It defines important concepts like utility, demand and supply curves, equilibrium price and quantity, costs of production, and elasticity. Various graphs and tables are presented to illustrate consumer choice concepts like indifference curves, the relationship between total utility and marginal utility, and the determinants of demand and supply.
This document discusses the economic theory of demand. It begins by introducing the concept of demand and what determines demand for a product. Key determinants of demand include price, income, tastes and preferences. The relationship between price and quantity demanded is shown using demand schedules and demand curves. The law of demand states that as price increases, quantity demanded decreases, and vice versa. Demand functions express this relationship mathematically. There are some exceptions to the law of demand. Elasticity measures the responsiveness of demand to changes in price and income. Price elasticity indicates whether demand is elastic, inelastic or unit elastic. Income elasticity also measures responsiveness but to changes in consumer income.
This document discusses the concept of supply in economics. It defines supply as the willingness and ability to sell goods at particular prices over time. The law of supply states that, all else equal, quantity supplied increases with price. Supply is influenced by factors like price, costs of inputs, technology, government policy, and more. Changes in supply can occur through shifts or movements along the supply curve. Elasticity of supply measures the responsiveness of quantity supplied to changes in factors like price. More idle capacity, stock levels, and flexibility of production make supply more elastic in the long-run than the short-run.
Business economics demand, supply and market equilibriumRachit Walia
The document discusses concepts of demand, supply, and market equilibrium in economics. It defines demand as the quantity consumers are willing to buy at a given price over time. The law of demand states that quantity demanded varies inversely with price. Demand curves are negatively sloped. Exceptions include Giffen goods. Factors influencing demand include price of substitutes/complements, income, expectations. Price elasticity measures the responsiveness of quantity to price changes. Elasticity can be perfectly inelastic, unitary, or perfectly elastic. Cross elasticity measures responsiveness between related goods. Income elasticity measures responsiveness to income changes and indicates if a good is normal or inferior. Supply is defined as the quantity producers are willing to sell
Demand refers to the quantity of a good consumers are willing and able to purchase at different prices, while supply refers to the quantity producers are willing to supply at different prices. The demand and supply curves for Kellogg's Cornflakes show an inverse relationship between price and quantity - as price decreases, demand increases as consumers will purchase more, and as price increases, supply increases as producers will supply more. Both demand and supply of Kellogg's Cornflakes are influenced by factors like price of substitutes, consumer income, production technology, and government policies.
The document discusses the concept of demand, including:
1) Demand analysis is essential for businesses to understand sales, production, costs, pricing, inventory, and profit planning.
2) Effective demand refers to when a consumer is willing and able to purchase a good.
3) Demand is determined by willingness and ability to pay, and is influenced by price, income, tastes, and other factors.
4) There are different types of demand curves that show the relationship between price and quantity demanded, income and quantity demanded, and how related goods impact demand.
5) The law of demand states that, all else equal, quantity demanded increases when price decreases.
This document provides an overview of demand, supply, and market equilibrium. It discusses key concepts such as:
- The law of demand which states that as price increases, quantity demanded decreases, assuming all other factors stay constant.
- Supply functions which show the relationship between quantity supplied and price when other factors are held fixed. The law of supply states that quantity supplied rises with price.
- Market equilibrium which occurs where quantity demanded equals quantity supplied, establishing an equilibrium price.
- Elasticities including price elasticity of demand, income elasticity of demand, and cross elasticity of demand which measure responsiveness of demand to changes in price, income, and prices of related goods.
This document is a chapter from a microeconomics textbook that discusses the concept of elasticity of demand and supply. It defines four types of elasticity - price elasticity of demand, cross elasticity of demand, income elasticity of demand, and price elasticity of supply. For each type, it provides the definition, formula, and categories (e.g. elastic vs. inelastic). It also provides examples and discusses how to calculate elasticities. The chapter concludes with an in-class activity for students to discuss examples of different elasticities of demand and supply.
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.
The document discusses various concepts related to demand including:
1. Demand is the quantity of a good or service that consumers are willing and able to buy at a given price in a given time period. Effective demand is backed by an ability to pay, while latent demand exists without purchasing power.
2. Derived demand is demand for a product that is linked to demand for a related product. For example, steel demand is derived from vehicle demand.
3. Elasticity of demand measures the responsiveness of quantity demanded to changes in price, income, or the price of a related good. Price elasticity is defined as the percentage change in quantity divided by the percentage change in price.
4. The daily energy demand
This document provides a summary of key concepts in microeconomics including:
1) The theories of demand and supply - how quantity demanded and supplied are determined based on price and other factors, and how equilibrium price is reached.
2) Elasticity - how responsive quantity is to price changes for both demand and supply. Factors that influence elasticity are discussed.
3) Applications including how minimum wage affects unemployment and how sales taxes impact producers and consumers.
4) Consumer choice theory - how preferences and budgets constrain choices to maximize utility. Individual demand curves are derived from indifference curves.
> Resources: DepEd SHS curriculum guide and Rex Book AE
> This helping material comes with a worksheet on a separate document. Message me for any questions. Hope this helps!
Applied Economics: Application of Demand and Supply (Chapter 2.1)
- The Market
- Demand
- The Law of Demand
- Non-Price Determinants of Demand
- Shifts of Demand Curve
- Supply
- The Law of Supply
- Non-Price Determinants of Supply
- Shits of Supply Curve
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.
Here are the steps to solve this problem:
1) Write the supply and demand functions:
Qd = 6,000 - 3P
Qs = 3,000 + 4.5P
2) Set the supply and demand functions equal to find the original equilibrium:
6,000 - 3P = 3,000 + 4.5P
3,000 = 7.5P
P* = Rs. 400
3) Add the excise duty of Rs. 20 per unit to the supply function:
New Supply = Qs + Tax = 3,000 + 4.5P + 20
4) Set the new supply equal to demand and solve for the new equilibrium price:
6,000 -
Managerial economics involves applying economic theories and tools of analysis to business decision-making. It helps managers make optimal choices around issues like production, pricing, investment, and sales. The key economic concepts used include demand and cost analysis, production and pricing theories, and capital budgeting. Managerial economics draws from both microeconomics, analyzing internal business issues, and macroeconomics, examining the external economic environment. It provides a framework and analytical methods for managers to systematically evaluate alternatives and select decisions that best achieve organizational objectives under resource constraints.
The document discusses the concept of supply in economics. It defines supply as the quantity of a commodity producers are willing and able to sell at a given price over a specific time period. The supply of a product is determined by several factors including its price, production costs, technology, government policies, and more. The supply schedule shows the relationship between price and quantity supplied, while the supply curve illustrates this graphically as an upward-sloping curve. Market equilibrium occurs at the price where quantity supplied equals quantity demanded. A change in the supply curve results from changes in its determinants and causes the equilibrium price and quantity to also change.
This document provides an overview of key concepts related to demand and supply in economics. It defines demand as the quantity of a good or service consumers are willing and able to purchase at a given price. The law of demand states that as price increases, quantity demanded decreases, and vice versa. Factors that influence demand include income, tastes, prices of substitutes and complements. Supply is defined as the quantity producers are willing and able to offer for sale at a given price. The law of supply states that as price increases, quantity supplied increases, and vice versa. Factors that influence supply include costs of production, technology, and expectations. Market equilibrium occurs where quantity demanded equals quantity supplied. Disequilibria result in sur
The document discusses market equilibrium and how it is achieved through the interaction of supply and demand. It defines market equilibrium as the point where supply and demand curves intersect, with no tendency for prices or quantities to change. Disequilibrium can result in surpluses or shortages. The market makes adjustments through shifts in supply and demand. Government can interfere through price ceilings, floors, taxes, and subsidies, which shift supply curves and potentially create black markets.
The document discusses demand analysis and forecasting. It defines demand and outlines the key determinants and types of demand, including price demand, income demand, and cross demand. It also explains the law of demand and its assumptions. Methods of measuring price elasticity of demand are described, including the total expenditure method, point method, and arc method. The significance and levels of demand forecasting are discussed. The main methods of demand forecasting are the survey method, including expert opinion surveys and consumer interviews, and statistical methods.
This document discusses airline traffic and demand modeling. It begins by explaining that traffic volume multiplied by yield must exceed operating costs for an airline to be profitable. It then covers modeling airline demand through demand functions and curves. Key points include how demand curves show the relationship between price and quantity demanded and how various factors can cause demand curves to shift. The document also discusses supply curves and how they relate to costs and profits for airlines. It explains the concept of market equilibrium between supply and demand. Finally, it covers elasticities of demand and supply as well as drivers of airline traffic demand like price, income, and service attributes.
This document contains an economic student's assignments on various topics including their dream company, the law of demand, forecasting tools like Weka, SPSS, and R, balance sheets, profit and loss, cash flow, break event point analysis, Comfar III, global competitiveness, market share, and British Petroleum's global sales. It was submitted by Sai Keerthana.N, a 15MBA1037 student, and concludes with a thank you.
The document discusses various data analysis and visualization techniques including the law of demand, using WEKA software to perform predictive modeling on daily share prices from a CSV file, forecasting demand by looking at buttons in Excel, using Excel and SPSS for analysis, replacing turnover data for Coal India with new values in a SAS program, performing break even analysis for 5 companies' 2015 turnover, and creating a pie chart of the turnover for 5 companies using Tableau software.
The document discusses various data analysis and predictive modeling tools including WEKA software, Excel for creating scatter plots and trendlines, SAS for compiling programs, and Tableau for creating pie charts. It mentions analyzing daily share prices over 3 months in a CSV file, forecasting demand, performing breakeven analysis for 5 companies' turnover in 2015, and creating a pie chart of the turnover for 5 major companies using Tableau software.
This document discusses the concept of supply in economics. It defines supply as the willingness and ability to sell goods at particular prices over time. The law of supply states that, all else equal, quantity supplied increases with price. Supply is influenced by factors like price, costs of inputs, technology, government policy, and more. Changes in supply can occur through shifts or movements along the supply curve. Elasticity of supply measures the responsiveness of quantity supplied to changes in factors like price. More idle capacity, stock levels, and flexibility of production make supply more elastic in the long-run than the short-run.
Business economics demand, supply and market equilibriumRachit Walia
The document discusses concepts of demand, supply, and market equilibrium in economics. It defines demand as the quantity consumers are willing to buy at a given price over time. The law of demand states that quantity demanded varies inversely with price. Demand curves are negatively sloped. Exceptions include Giffen goods. Factors influencing demand include price of substitutes/complements, income, expectations. Price elasticity measures the responsiveness of quantity to price changes. Elasticity can be perfectly inelastic, unitary, or perfectly elastic. Cross elasticity measures responsiveness between related goods. Income elasticity measures responsiveness to income changes and indicates if a good is normal or inferior. Supply is defined as the quantity producers are willing to sell
Demand refers to the quantity of a good consumers are willing and able to purchase at different prices, while supply refers to the quantity producers are willing to supply at different prices. The demand and supply curves for Kellogg's Cornflakes show an inverse relationship between price and quantity - as price decreases, demand increases as consumers will purchase more, and as price increases, supply increases as producers will supply more. Both demand and supply of Kellogg's Cornflakes are influenced by factors like price of substitutes, consumer income, production technology, and government policies.
The document discusses the concept of demand, including:
1) Demand analysis is essential for businesses to understand sales, production, costs, pricing, inventory, and profit planning.
2) Effective demand refers to when a consumer is willing and able to purchase a good.
3) Demand is determined by willingness and ability to pay, and is influenced by price, income, tastes, and other factors.
4) There are different types of demand curves that show the relationship between price and quantity demanded, income and quantity demanded, and how related goods impact demand.
5) The law of demand states that, all else equal, quantity demanded increases when price decreases.
This document provides an overview of demand, supply, and market equilibrium. It discusses key concepts such as:
- The law of demand which states that as price increases, quantity demanded decreases, assuming all other factors stay constant.
- Supply functions which show the relationship between quantity supplied and price when other factors are held fixed. The law of supply states that quantity supplied rises with price.
- Market equilibrium which occurs where quantity demanded equals quantity supplied, establishing an equilibrium price.
- Elasticities including price elasticity of demand, income elasticity of demand, and cross elasticity of demand which measure responsiveness of demand to changes in price, income, and prices of related goods.
This document is a chapter from a microeconomics textbook that discusses the concept of elasticity of demand and supply. It defines four types of elasticity - price elasticity of demand, cross elasticity of demand, income elasticity of demand, and price elasticity of supply. For each type, it provides the definition, formula, and categories (e.g. elastic vs. inelastic). It also provides examples and discusses how to calculate elasticities. The chapter concludes with an in-class activity for students to discuss examples of different elasticities of demand and supply.
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.
The document discusses various concepts related to demand including:
1. Demand is the quantity of a good or service that consumers are willing and able to buy at a given price in a given time period. Effective demand is backed by an ability to pay, while latent demand exists without purchasing power.
2. Derived demand is demand for a product that is linked to demand for a related product. For example, steel demand is derived from vehicle demand.
3. Elasticity of demand measures the responsiveness of quantity demanded to changes in price, income, or the price of a related good. Price elasticity is defined as the percentage change in quantity divided by the percentage change in price.
4. The daily energy demand
This document provides a summary of key concepts in microeconomics including:
1) The theories of demand and supply - how quantity demanded and supplied are determined based on price and other factors, and how equilibrium price is reached.
2) Elasticity - how responsive quantity is to price changes for both demand and supply. Factors that influence elasticity are discussed.
3) Applications including how minimum wage affects unemployment and how sales taxes impact producers and consumers.
4) Consumer choice theory - how preferences and budgets constrain choices to maximize utility. Individual demand curves are derived from indifference curves.
> Resources: DepEd SHS curriculum guide and Rex Book AE
> This helping material comes with a worksheet on a separate document. Message me for any questions. Hope this helps!
Applied Economics: Application of Demand and Supply (Chapter 2.1)
- The Market
- Demand
- The Law of Demand
- Non-Price Determinants of Demand
- Shifts of Demand Curve
- Supply
- The Law of Supply
- Non-Price Determinants of Supply
- Shits of Supply Curve
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.
Here are the steps to solve this problem:
1) Write the supply and demand functions:
Qd = 6,000 - 3P
Qs = 3,000 + 4.5P
2) Set the supply and demand functions equal to find the original equilibrium:
6,000 - 3P = 3,000 + 4.5P
3,000 = 7.5P
P* = Rs. 400
3) Add the excise duty of Rs. 20 per unit to the supply function:
New Supply = Qs + Tax = 3,000 + 4.5P + 20
4) Set the new supply equal to demand and solve for the new equilibrium price:
6,000 -
Managerial economics involves applying economic theories and tools of analysis to business decision-making. It helps managers make optimal choices around issues like production, pricing, investment, and sales. The key economic concepts used include demand and cost analysis, production and pricing theories, and capital budgeting. Managerial economics draws from both microeconomics, analyzing internal business issues, and macroeconomics, examining the external economic environment. It provides a framework and analytical methods for managers to systematically evaluate alternatives and select decisions that best achieve organizational objectives under resource constraints.
The document discusses the concept of supply in economics. It defines supply as the quantity of a commodity producers are willing and able to sell at a given price over a specific time period. The supply of a product is determined by several factors including its price, production costs, technology, government policies, and more. The supply schedule shows the relationship between price and quantity supplied, while the supply curve illustrates this graphically as an upward-sloping curve. Market equilibrium occurs at the price where quantity supplied equals quantity demanded. A change in the supply curve results from changes in its determinants and causes the equilibrium price and quantity to also change.
This document provides an overview of key concepts related to demand and supply in economics. It defines demand as the quantity of a good or service consumers are willing and able to purchase at a given price. The law of demand states that as price increases, quantity demanded decreases, and vice versa. Factors that influence demand include income, tastes, prices of substitutes and complements. Supply is defined as the quantity producers are willing and able to offer for sale at a given price. The law of supply states that as price increases, quantity supplied increases, and vice versa. Factors that influence supply include costs of production, technology, and expectations. Market equilibrium occurs where quantity demanded equals quantity supplied. Disequilibria result in sur
The document discusses market equilibrium and how it is achieved through the interaction of supply and demand. It defines market equilibrium as the point where supply and demand curves intersect, with no tendency for prices or quantities to change. Disequilibrium can result in surpluses or shortages. The market makes adjustments through shifts in supply and demand. Government can interfere through price ceilings, floors, taxes, and subsidies, which shift supply curves and potentially create black markets.
The document discusses demand analysis and forecasting. It defines demand and outlines the key determinants and types of demand, including price demand, income demand, and cross demand. It also explains the law of demand and its assumptions. Methods of measuring price elasticity of demand are described, including the total expenditure method, point method, and arc method. The significance and levels of demand forecasting are discussed. The main methods of demand forecasting are the survey method, including expert opinion surveys and consumer interviews, and statistical methods.
This document discusses airline traffic and demand modeling. It begins by explaining that traffic volume multiplied by yield must exceed operating costs for an airline to be profitable. It then covers modeling airline demand through demand functions and curves. Key points include how demand curves show the relationship between price and quantity demanded and how various factors can cause demand curves to shift. The document also discusses supply curves and how they relate to costs and profits for airlines. It explains the concept of market equilibrium between supply and demand. Finally, it covers elasticities of demand and supply as well as drivers of airline traffic demand like price, income, and service attributes.
This document contains an economic student's assignments on various topics including their dream company, the law of demand, forecasting tools like Weka, SPSS, and R, balance sheets, profit and loss, cash flow, break event point analysis, Comfar III, global competitiveness, market share, and British Petroleum's global sales. It was submitted by Sai Keerthana.N, a 15MBA1037 student, and concludes with a thank you.
The document discusses various data analysis and visualization techniques including the law of demand, using WEKA software to perform predictive modeling on daily share prices from a CSV file, forecasting demand by looking at buttons in Excel, using Excel and SPSS for analysis, replacing turnover data for Coal India with new values in a SAS program, performing break even analysis for 5 companies' 2015 turnover, and creating a pie chart of the turnover for 5 companies using Tableau software.
The document discusses various data analysis and predictive modeling tools including WEKA software, Excel for creating scatter plots and trendlines, SAS for compiling programs, and Tableau for creating pie charts. It mentions analyzing daily share prices over 3 months in a CSV file, forecasting demand, performing breakeven analysis for 5 companies' turnover in 2015, and creating a pie chart of the turnover for 5 major companies using Tableau software.
The document discusses supply and demand, including the law of demand and how demand curves slope downward, and the law of supply and how supply curves slope upward. It provides examples of how quantity demanded and supplied change in response to price changes, and what can cause a shift in the demand or supply curve, such as changes in tastes, income, the prices of related goods, or expectations.
The document proposes deploying Domino's Pizza in Myanmar. It begins with an agenda that includes analyzing the market opportunities and objectives, performing a SWOT and Porter's Five Forces analysis, addressing ethical dilemmas and CSR strategy, and assessing feasibility. It then provides background on Domino's history and operations, a country profile of Myanmar including demographics, and analysis of the food industry and market opportunities there. The document concludes with sales expectations, addressing competition, and questions.
MBA: Managerial Economics - Supply and Demand Curve RelationshipKishan Kumar
This MBA Managerial Economics assignment explains in-depth on the Supply & Demand methodology. With clear illustrations of data, graphs & formula readers are able to grab the concept of the Supply & Demand curve with the effect of consumers behavior.
The document is an economics presentation about price effect. It defines price effect as the change in demand in response to a change in price of a commodity, with other factors held constant. Price effect is the sum of the substitution effect and income effect. The substitution effect occurs when consumers substitute cheaper goods for more expensive goods to maximize satisfaction at a fixed income level. The income effect depends on whether a good is normal, inferior, or a Giffen good, and how changes in real income from price changes affect demand for that good.
This document provides an overview of microeconomics topics covered in an assignment, including:
1) Microeconomics examines the economic decisions of individuals and small organizations regarding allocation of scarce resources and how supply and demand determine prices.
2) Key microeconomics topics covered include demand and supply theory, elasticities, consumer demand, production theory, and different market structures such as perfect competition and monopoly.
3) The document also discusses assumptions of rationality and completeness in microeconomic models and distinguishes positive from normative economics.
The document discusses different market structures including perfect competition, monopoly, monopolistic competition, and oligopoly. It provides definitions and key assumptions of each market structure. For perfect competition, it describes characteristics like numerous buyers and sellers, homogeneous products, free entry and exit. It also discusses equilibrium price and output determination under perfect competition. For monopoly, it discusses sources of market imperfections and how revenues are determined. It provides a comparison of monopoly and perfect competition.
Theory of demand / supply, Price Elasticity, Indifference curves, Welfare ana...Dr Naim R Kidwai
The document discusses theories of demand, including the definition of demand, factors that influence demand, and the law of demand. It also covers elasticity of demand, indifference curves, budget lines, and welfare analysis. Specifically, it defines demand as the quantity of a good consumers are willing and able to buy at a given price. It also explains that the law of demand states that as price increases, demand decreases, and vice versa.
This document provides an analysis of the sports footwear and apparel industry, with a focus on Nike Corporation. It defines the industry as operating within sports footwear and apparel and discusses Nike's expansion beyond running shoes into a wide range of sports and leisure wear. The document also examines Nike's largest competitor Adidas Group, industry structure factors like threats of new entrants and substitutes, and how the industry and Nike are impacted by economic, social, and technological changes.
This document provides information about demand, supply, and market equilibrium for Coca-Cola. It discusses the history and invention of Coca-Cola, the basic concepts of demand and supply, factors that affect demand and supply, and the relationship between price, demand, and supply. Specifically, it explains that demand for Coca-Cola depends on factors like price, income, tastes, and policies while supply depends on price, technology, number of consumers, and input prices. It also illustrates the laws of demand and supply through demand and supply curves for Coca-Cola.
Domino's Pizza is the world's second largest pizza chain with over 9,000 stores across 60 countries. Founded in 1960 in Michigan, Domino's focuses on home delivery and has a network of over 300 stores in India. Key products include pizzas, breadsticks, pastas and wings. Domino's emphasizes a vision of being the best pizza delivery company through its mission of consistently delighting customers with great tasting food and friendly service. The company utilizes a hub-and-spoke distribution model and focuses on intensive online and mobile ordering to drive growth.
Price is a key element of the marketing mix that generates revenue. It communicates the value of a product and is determined based on customer perceived value and costs. When setting prices, companies analyze factors like demand, costs, competition and select objectives like profit maximization. Appropriate pricing requires estimating demand curves and price elasticity to understand customer sensitivity.
Samsung Electronics was founded in 1969 in South Korea and has since become a global leader in electronics manufacturing. It is the world's largest manufacturer of semiconductors, LCD displays, mobile phones, and memory chips. Samsung invests heavily in research and development, spending around $5 billion annually to develop innovative new products and technologies. This focus on innovation, along with a wide range of consumer electronics products, has made Samsung one of the most valuable brands in the world.
This document discusses the economic concepts of supply and demand. It defines supply and demand as the relationship between price and quantity in a competitive market. The supply curve shows the quantity supplied at different prices, and the demand curve shows quantity demanded. Where the supply and demand curves intersect is the equilibrium price and quantity, where quantity supplied equals quantity demanded. The document discusses how shifts in supply or demand curves due to changes in costs, incomes, prices of related goods, etc. impact the equilibrium price and quantity in the market.
Supply and Demand GuideTo solve the homework problems do the f.docxpicklesvalery
Supply and Demand Guide
To solve the homework problems do the following:
1. Identify the determinant change
2. Shift the appropriate curve in the correct direction
3. Change price appropriately
4. Move along the other curve (the one that did not shift) in response to the price change.
The following information will tell you the determinants and how the change, as well as definitions of the key terms.
Demand
Demand: The amount that consumers are willing and able to purchase at various prices.
Law of Demand: Price and Quantity Demanded vary inversely.
Quantity Demanded: The amount that consumers are willing and able to buy at a particular price.
Change in Quantity Demanded: Changes in price change the quantity demanded. This is a Movement Along a Demand Curve in Response to a Price Change.
Change in Demand: This is a shift in the position of the demand curve, either upward or downward. If the curve shifts upward, consumers are saying they will pay more for all quantities of the good or service. If it shifts downward, consumers are saying they will pay less for all quantities of the good or service.
Determinants of Demand: The Demand Curve will shift only when one (or more) of the Determinants of Demand changes. These determinants are:
1. Size of Market: the number of consumers in the market for the good or service. If this factor increases, the curve shifts upward (increase in demand). If this decreases, the curve shifts downward (decrease in demand).
2. Consumer Tastes and Preferences: if these shift in favor of a product, the demand curve shifts upward (demand increases); if these shift against a product, the demand curve shifts downward (demand decreases).
3. Consumer Income: as the income of consumers increase, consumers purchase more of all normal goods (assume all the goods in the homework are normal goods), this shifts the demand curve upward (demand increases); if income decreases, then consumers buy less of all normal goods, this shifts the demand curve downward (demand decreases).
4. Prices of Related Goods:
a. Complimentary Goods: These are goods that are used to together like peanut butter and jelly. If the price of peanut butter goes up, the Quantity Demanded of peanut butter will decrease (a movement along a demand curve in response to a price change). However, the Demand for jelly will decline (decrease in demand) as fewer people buy it to go with the peanut butter, since they are buying less peanut butter.
b. Substitute Goods: These are goods that are used in place of each other. If the price of Coke Cola goes up, the Quantity Demanded of Coke does down (a movement along the demand curve). But the Demand for Pepsi – the substitute good – goes up as people substitute the lower priced Pepsi for the higher priced Coke (the Pepsi demand curve shifts upward).
5. Expectations about the Future: If people have a positive view of the future they will consumer more and save less. This shifts th ...
This document discusses the economic concepts of supply, demand, and market equilibrium. It provides details on:
1) How supply and demand curves model the relationship between price, quantity supplied, and quantity demanded in a competitive market, resulting in an equilibrium price and quantity.
2) The key determinants that influence supply and demand curves, including price, income, tastes, population, and prices of substitutes and complements.
3) How shifts in supply or demand curves due to changes in these determinants impact the market equilibrium price and quantity.
Here I describe supply. The law of supply.Supply curve and supply schedule with their Example.Shifty in the supply curve.Market Demand and many Things.
The document provides an overview of key concepts in supply and demand including:
- Supply and demand determine equilibrium price and quantity in a competitive market
- The demand curve slopes downward as quantity demanded increases with lower price
- Supply curve slopes upward as quantity supplied increases with higher price
- Equilibrium is reached at the price where quantity supplied equals quantity demanded
- Shifts in supply or demand curves change the equilibrium price and quantity in predictable ways
The document discusses demand curves and consumer surplus. It explains that the demand curve shows the relationship between the quantity demanded of a good and its price, with demand typically being downward sloping. Consumer surplus is defined as the difference between what a consumer is willing to pay for a good and the actual amount paid, and it represents the total benefit consumers receive from purchasing a good. The market demand curve is obtained by summing the individual demand curves of all consumers in the market. Consumer surplus for the market as a whole is measured by the area under the demand curve and above the price.
Supply and Demand GuideTo solve the homework problems do the f.docxcalvins9
Supply and Demand Guide
To solve the homework problems do the following:
1. Identify the determinant change
2. Shift the appropriate curve in the correct direction
3. Change price appropriately
4. Move along the other curve (the one that did not shift) in response to the price change.
The following information will tell you the determinants and how the change, as well as definitions of the key terms.
Demand
Demand: The amount that consumers are willing and able to purchase at various prices.
Law of Demand: Price and Quantity Demanded vary inversely.
Quantity Demanded: The amount that consumers are willing and able to buy at a particular price.
Change in Quantity Demanded: Changes in price change the quantity demanded. This is a Movement Along a Demand Curve in Response to a Price Change.
Change in Demand: This is a shift in the position of the demand curve, either upward or downward. If the curve shifts upward, consumers are saying they will pay more for all quantities of the good or service. If it shifts downward, consumers are saying they will pay less for all quantities of the good or service.
Determinants of Demand: The Demand Curve will shift only when one (or more) of the Determinants of Demand changes. These determinants are:
1. Size of Market: the number of consumers in the market for the good or service. If this factor increases, the curve shifts upward (increase in demand). If this decreases, the curve shifts downward (decrease in demand).
2. Consumer Tastes and Preferences: if these shift in favor of a product, the demand curve shifts upward (demand increases); if these shift against a product, the demand curve shifts downward (demand decreases).
3. Consumer Income: as the income of consumers increase, consumers purchase more of all normal goods (assume all the goods in the homework are normal goods), this shifts the demand curve upward (demand increases); if income decreases, then consumers buy less of all normal goods, this shifts the demand curve downward (demand decreases).
4. Prices of Related Goods:
a. Complimentary Goods: These are goods that are used to together like peanut butter and jelly. If the price of peanut butter goes up, the Quantity Demanded of peanut butter will decrease (a movement along a demand curve in response to a price change). However, the Demand for jelly will decline (decrease in demand) as fewer people buy it to go with the peanut butter, since they are buying less peanut butter.
b. Substitute Goods: These are goods that are used in place of each other. If the price of Coke Cola goes up, the Quantity Demanded of Coke does down (a movement along the demand curve). But the Demand for Pepsi – the substitute good – goes up as people substitute the lower priced Pepsi for the higher priced Coke (the Pepsi demand curve shifts upward).
5. Expectations about the Future: If people have a positive view of the future they will consumer more and save less. This shifts th.
The document discusses supply and demand equilibrium in markets. It defines the law of supply, individual versus market supply, and short-run versus long-run supply curves. It also discusses the determinants of supply curves and how shifts in supply curves occur due to changes in these determinants. The key factors that determine equilibrium price and quantity in a market are the intersection of supply and demand. Shifts in either supply or demand curves will result in a new equilibrium price and quantity.
The document discusses supply and demand equilibrium in markets. It defines the law of supply, individual versus market supply, and short-run versus long-run supply curves. It also discusses the determinants of supply curves and how shifts in supply curves occur due to changes in these determinants. The key factors that determine equilibrium price and quantity in a market are the intersection of supply and demand. Shifts in either supply or demand curves will result in a new equilibrium price and quantity.
The document discusses the concepts of supply and demand. It defines supply and demand, and explains the laws of supply and demand which state that demand decreases as price increases, and supply increases as price increases. It also discusses the determinants that impact supply and demand, such as price, income, number of buyers/sellers, and technology. The document explains how equilibrium is reached when supply equals demand at a certain price point, and how disequilibrium can occur when there is excess supply or excess demand.
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.
Macro Economics
For downloading this contact- bikashkumar.bk100@gmail.com
Prepared by Students of University of Rajshahi
Arif Hossain
Md.Abdul Aual
Risul Islam
Abul Kalam
MD Rasel Mollah
MD Rabiul Islam
The document defines key economic concepts related to markets, demand, supply, and market equilibrium. It provides definitions of demand, determinants of demand, demand curves, changes in demand versus changes in quantity demanded. Similarly, it defines supply, determinants of supply, supply curves, and changes in supply versus changes in quantity supplied. It then explains how market equilibrium is reached at the price where quantity demanded equals quantity supplied, and how equilibrium can be impacted by changes in demand or supply.
This document discusses demand analysis and the factors that influence demand. It covers the key concepts of demand, including the law of demand which states that quantity demanded is inversely related to price when all other factors are held constant. The document explains the factors that cause the demand curve to slope downward, such as substitution effects and income effects. It also discusses exceptions to the law of demand and other factors that influence demand, such as income, price of related goods, tastes and preferences.
This document defines demand and discusses the different types of demand. It explains that demand is expressed in relation to price and time period. The key types of demand discussed are individual demand, market demand, ex-ante and ex-post demand, and joint demand. Determinants of demand include price, income, tastes/preferences, prices of related goods, expectations, credit availability, population, income distribution, and government policy. The law of demand and exceptions to it are explained. Movement along and shifts of the demand curve are also summarized.
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.
1. In microeconomics, supply and demand is an economic model of price
determination in a market. It concludes that in a competitive market, the
unit price for a particular good will vary until it settles at a point where
the quantity demanded by consumers (at current price) will equal the
quantity supplied by producers (at current price), resulting in an
economic equilibrium for price and quantity.
The four basic laws of supply and demand are:[1]
1.If demand increases and supply remains unchanged, a shortage
occurs, leading to a higher equilibrium price.
2.If demand decreases and supply remains unchanged, a surplus
occurs, leading to a lower equilibrium price.
3.If demand remains unchanged and supply increases, a surplus
occurs, leading to a lower equilibrium price.
4.If demand remains unchanged and supply decreases, a shortage
occurs, leading to a higher equilibrium price.
Contents [hide]
1 Graphical representation of
supply and demand
1.1 Supply schedule
1.2 Demand schedule
2 Microeconomics
2.1 Equilibrium
2.2 Partial equilibrium
3 Other markets
4 Empirical estimation
5 Macroeconomic uses of demand
and supply
6 History
7 Criticisms
8 See also
9 References
10 External links
[edit]
Graphical representation of supply and demand
Although it is normal to regard the quantity demanded and the
2. quantity supplied as functions of the price of the good, the standard
graphical representation, usually attributed to Alfred Marshall, has price
on the vertical axis and quantity on the horizontal axis, the opposite of
the standard convention for the representation of a mathematical
function.
Since determinants of supply and demand other than the price of the
good in question are not explicitly represented in the supply-demand
diagram, changes in the values of these variables are represented by
moving the supply and demand curves (often described as "shifts" in
the curves). By contrast, responses to changes in the price of the good
are represented as movements along unchanged supply and demand
curves.
[edit]
Supply schedule
A supply schedule is a table that shows the relationship between the
price of a good and the quantity supplied. A supply curve is a graph that
illustrates that relationship between the price of a good and the quantity
supplied .
Under the assumption of perfect competition, supply is determined by
marginal cost. Firms will produce additional output while the cost of
producing an extra unit of output is less than the price they would
receive.
By its very nature, conceptualizing a supply curve requires the firm to be
a perfect competitor, namely requires the firm to have no influence over
the market price. This is true because each point on the supply curve is
the answer to the question "If this firm is faced with this potential price,
how much output will it be able to and willing to sell?" If a firm has
market power, its decision of how much output to provide to the market
influences the market price, then the firm is not "faced with" any price,
and the question is meaningless.
Economists distinguish between the supply curve of an individual firm
and between the market supply curve. The market supply curve is
obtained by summing the quantities supplied by all suppliers at each
potential price. Thus, in the graph of the supply curve, individual firms'
3. supply curves are added horizontally to obtain the market supply curve.
Economists also distinguish the short-run market supply curve from the
long-run market supply curve. In this context, two things are assumed
constant by definition of the short run: the availability of one or more
fixed inputs (typically physical capital), and the number of firms in the
industry. In the long run, firms have a chance to adjust their holdings of
physical capital, enabling them to better adjust their quantity supplied at
any given price. Furthermore, in the long run potential competitors can
enter or exit the industry in response to market conditions. For both of
these reasons, long-run market supply curves are flatter than their
short-run counterparts.
The determinants of supply are:
1.Production costs, how much a good costs to be produced
2.The technology used in production, and/or technological advances
3.Firms' expectations about future prices
4.Number of suppliers
[edit]
Demand schedule
A demand schedule, depicted graphically as the demand curve,
represents the amount of some good that buyers are willing and able to
purchase at various prices, assuming all determinants of demand other
than the price of the good in question, such as income, tastes and
preferences, the price of substitute goods, and the price of
complementary goods, remain the same. Following the law of demand,
the demand curve is almost always represented as downward-sloping,
meaning that as price decreases, consumers will buy more of the
good.[2]
Just like the supply curves reflect marginal cost curves, demand curves
are determined by marginal utility curves.[3] Consumers will be willing to
buy a given quantity of a good, at a given price, if the marginal utility of
additional consumption is equal to the opportunity cost determined by
the price, that is, the marginal utility of alternative consumption choices.
The demand schedule is defined as the willingness and ability of a
consumer to purchase a given product in a given frame of time.
4. It is aforementioned, that the demand curve is generally downward-
sloping, there may be rare examples of goods that have upward-sloping
demand curves. Two different hypothetical types of goods with upward-
sloping demand curves are Giffen goods (an inferior but staple good)
and Veblen goods (goods made more fashionable by a higher price).
By its very nature, conceptualizing a demand curve requires that the
purchaser be a perfect competitor—that is, that the purchaser has no
influence over the market price. This is true because each point on the
demand curve is the answer to the question "If this buyer is faced with
this potential price, how much of the product will it purchase?" If a buyer
has market power, so its decision of how much to buy influences the
market price, then the buyer is not "faced with" any price, and the
question is meaningless.
Like with supply curves, economists distinguish between the demand
curve of an individual and the market demand curve. The market
demand curve is obtained by summing the quantities demanded by all
consumers at each potential price. Thus, in the graph of the demand
curve, individuals' demand curves are added horizontally to obtain the
market demand curve.
The determinants of demand are:
1.Income
2.Tastes and preferences
3.Prices of related goods and services
4.Consumers' expectations about future prices and incomes that can be
checked
5.Number of potential consumers
[edit]
Microeconomics
[edit]
Equilibrium
Equilibrium is defined to be the price-quantity pair where the quantity
demanded is equal to the quantity supplied, represented by the
intersection of the demand and supply curves.
5. Market Equilibrium: A situation in a market when the price is such that
the quantity that consumers demand is correctly balanced by the
quantity that firms wish to supply.
Comparative static analysis: Examines the likely effect on the
equilibrium of a change in the external conditions affecting the market.
Changes in market equilibrium: Practical uses of supply and demand
analysis often center on the different variables that change equilibrium
price and quantity, represented as shifts in the respective curves.
Comparative statics of such a shift traces the effects from the initial
equilibrium to the new equilibrium.
Demand curve shifts:
Main article: Demand curve
When consumers increase the quantity demanded at a given price, it is
referred to as an increase in demand. Increased demand can be
represented on the graph as the curve being shifted to the right. At each
price point, a greater quantity is demanded, as from the initial curve D1
to the new curve D2. In the diagram, this raises the equilibrium price
from P1 to the higher P2. This raises the equilibrium quantity from Q1 to
the higher Q2. A movement along the curve is described as a "change
in the quantity demanded" to distinguish it from a "change in demand,"
that is, a shift of the curve. there has been an increase in demand which
has caused an increase in (equilibrium) quantity. The increase in
demand could also come from changing tastes and fashions, incomes,
price changes in complementary and substitute goods, market
expectations, and number of buyers. This would cause the entire
demand curve to shift changing the equilibrium price and quantity. Note
in the diagram that the shift of the demand curve, by causing a new
equilibrium price to emerge, resulted in movement along the supply
curve from the point (Q1, P1) to the point Q2, P2).
If the demand decreases, then the opposite happens: a shift of the
curve to the left. If the demand starts at D2, and decreases to D1, the
equilibrium price will decrease, and the equilibrium quantity will also
decrease. The quantity supplied at each price is the same as before the
demand shift, reflecting the fact that the supply curve has not shifted;
but the equilibrium quantity and price are different as a result of the
6. change (shift) in demand.
The movement of the demand curve in response to a change in a non-
price determinant of demand is caused by a change in the x-intercept,
the constant term of the demand equation.
Supply curve shifts:
Main article: Supply (economics)
When technological progress occurs, the supply curve shifts. For
example, assume that someone invents a better way of growing wheat
so that the cost of growing a given quantity of wheat decreases.
Otherwise stated, producers will be willing to supply more wheat at
every price and this shifts the supply curve S1 outward, to S2—an
increase in supply. This increase in supply causes the equilibrium price
to decrease from P1 to P2. The equilibrium quantity increases from Q1
to Q2 as consumers move along the demand curve to the new lower
price. As a result of a supply curve shift, the price and the quantity move
in opposite directions.
If the quantity supplied decreases, the opposite happens. If the supply
curve starts at S2, and shifts leftward to S1, the equilibrium price will
increase and the equilibrium quantity will decrease as consumers move
along the demand curve to the new higher price and associated lower
quantity demanded. The quantity demanded at each price is the same
as before the supply shift, reflecting the fact that the demand curve has
not shifted. But due to the change (shift) in supply, the equilibrium
quantity and price have changed.
The movement of the supply curve in response to a change in a non-
price determinant of supply is caused by a change in the y-intercept, the
constant term of the supply equation. The supply curve shifts up and
down the y axis as non-price determinants of demand change.
7. Economics Basics: Supply and Demand
Filed Under » Alfred Marshall, Macroeconomics,
Microeconomics, Monetary Policy
Supply and demand is perhaps one of the most fundamental
concepts of economics and it is the backbone of a market
economy. Demand refers to how much (quantity) of a product
or service is desired by buyers. The quantity demanded is the
amount of a product people are willing to buy at a certain
price; the relationship between price and quantity demanded
is known as the demand relationship. Supply represents how
much the market can offer. The quantity supplied refers to the
amount of a certain good producers are willing to supply when
receiving a certain price. The correlation between price and
how much of a good or service is supplied to the market is
known as the supply relationship. Price, therefore, is a
reflection of supply and demand.
The relationship between demand and supply underlie the
forces behind the allocation of resources. In market economy
theories, demand and supply theory will allocate resources in
the most efficient way possible. How? Let us take a closer look
at the law of demand and the law of supply.
A. The Law of Demand
The law of demand states that, if all other factors remain
equal, the higher the price of a good, the less people will
demand that good. In other words, the higher the price, the
lower the quantity demanded. The amount of a good that
buyers purchase at a higher price is less because as the price
of a good goes up, so does the opportunity cost of buying that
good. As a result, people will naturally avoid buying a product
that will force them to forgo the consumption of something
else they value more. The chart below shows that the curve is
a downward slope.
8. A, B and C are points on the demand curve. Each point on the
curve reflects a direct correlation between quantity demanded
(Q) and price (P). So, at point A, the quantity demanded will
be Q1 and the price will be P1, and so on. The demand
relationship curve illustrates the negative relationship between
price and quantity demanded. The higher the price of a good
the lower the quantity demanded (A), and the lower the price,
the more the good will be in demand (C).
B. The Law of Supply
Like the law of demand, the law of supply demonstrates the
quantities that will be sold at a certain price. But unlike the
law of demand, the supply relationship shows an upward
slope. This means that the higher the price, the higher the
quantity supplied. Producers supply more at a higher price
because selling a higher quantity at a higher price increases
revenue.
9. A, B and C are points on the supply curve. Each point on the
curve reflects a direct correlation between quantity supplied
(Q) and price (P). At point B, the quantity supplied will be Q2
and the price will be P2, and so on. (To learn how economic
factors are used in currency trading, read Forex Walkthrough:
Economics.)
Time and Supply
Unlike the demand relationship, however, the supply
relationship is a factor of time. Time is important to supply
because suppliers must, but cannot always, react quickly to a
change in demand or price. So it is important to try and
determine whether a price change that is caused by demand
will be temporary or permanent.
Let's say there's a sudden increase in the demand and price
for umbrellas in an unexpected rainy season; suppliers may
simply accommodate demand by using their production
equipment more intensively. If, however, there is a climate
change, and the population will need umbrellas year-round,
the change in demand and price will be expected to be long
term; suppliers will have to change their equipment and
10. production facilities in order to meet the long-term levels of
demand.
C. Supply and Demand Relationship
Now that we know the laws of supply and demand, let's turn
to an example to show how supply and demand affect price.
Imagine that a special edition CD of your favorite band is
released for $20. Because the record company's previous
analysis showed that consumers will not demand CDs at a
price higher than $20, only ten CDs were released because the
opportunity cost is too high for suppliers to produce more. If,
however, the ten CDs are demanded by 20 people, the price
will subsequently rise because, according to the demand
relationship, as demand increases, so does the price.
Consequently, the rise in price should prompt more CDs to be
supplied as the supply relationship shows that the higher the
price, the higher the quantity supplied.
If, however, there are 30 CDs produced and demand is still at
20, the price will not be pushed up because the supply more
than accommodates demand. In fact after the 20 consumers
have been satisfied with their CD purchases, the price of the
leftover CDs may drop as CD producers attempt to sell the
remaining ten CDs. The lower price will then make the CD
more available to people who had previously decided that the
opportunity cost of buying the CD at $20 was too high.
D. Equilibrium
When supply and demand are equal (i.e. when the supply
function and demand function intersect) the economy is said
to be at equilibrium. At this point, the allocation of goods is at
its most efficient because the amount of goods being supplied
is exactly the same as the amount of goods being demanded.
Thus, everyone (individuals, firms, or countries) is satisfied
with the current economic condition. At the given price,
11. suppliers are selling all the goods that they have produced and
consumers are getting all the goods that they are demanding.
As you can see on the chart, equilibrium occurs at the
intersection of the demand and supply curve, which indicates
no allocative inefficiency. At this point, the price of the goods
will be P* and the quantity will be Q*. These figures are
referred to as equilibrium price and quantity.
In the real market place equilibrium can only ever be reached
in theory, so the prices of goods and services are constantly
changing in relation to fluctuations in demand and supply.
E. Disequilibrium
Disequilibrium occurs whenever the price or quantity is not
equal to P* or Q*.
1. Excess Supply
If the price is set too high, excess supply will be created within
the economy and there will be allocative inefficiency.
12. At price P1 the quantity of goods that the producers wish to
supply is indicated by Q2. At P1, however, the quantity that
the consumers want to consume is at Q1, a quantity much less
than Q2. Because Q2 is greater than Q1, too much is being
produced and too little is being consumed. The suppliers are
trying to produce more goods, which they hope to sell to
increase profits, but those consuming the goods will find the
product less attractive and purchase less because the price is
too high.
2. Excess Demand
Excess demand is created when price is set below the
equilibrium price. Because the price is so low, too many
consumers want the good while producers are not making
enough of it.
In this situation, at price P1, the quantity of goods demanded
by consumers at this price is Q2. Conversely, the quantity of
goods that producers are willing to produce at this price is Q1.
Thus, there are too few goods being produced to satisfy the
wants (demand) of the consumers. However, as consumers
have to compete with one other to buy the good at this price,
the demand will push the price up, making suppliers want to
supply more and bringing the price closer to its equilibrium.
F. Shifts vs. Movement
For economics, the "movements" and "shifts" in relation to the
13. supply and demand curves represent very different market
phenomena:
1. Movements
A movement refers to a change along a curve. On the demand
curve, a movement denotes a change in both price and
quantity demanded from one point to another on the curve.
The movement implies that the demand relationship remains
consistent. Therefore, a movement along the demand curve
will occur when the price of the good changes and the quantity
demanded changes in accordance to the original demand
relationship. In other words, a movement occurs when a
change in the quantity demanded is caused only by a change
in price, and vice versa.
Like a movement along the demand curve, a movement along
the supply curve means that the supply relationship remains
consistent. Therefore, a movement along the supply curve will
occur when the price of the good changes and the quantity
supplied changes in accordance to the original supply
relationship. In other words, a movement occurs when a
change in quantity supplied is caused only by a change in
price, and vice versa.
14. 2. Shifts
A shift in a demand or supply curve occurs when a good's
quantity demanded or supplied changes even though price
remains the same. For instance, if the price for a bottle of beer
was $2 and the quantity of beer demanded increased from Q1
to Q2, then there would be a shift in the demand for beer.
Shifts in the demand curve imply that the original demand
relationship has changed, meaning that quantity demand is
affected by a factor other than price. A shift in the demand
relationship would occur if, for instance, beer suddenly became
the only type of alcohol available for consumption.
Conversely, if the price for a bottle of beer was $2 and the
quantity supplied decreased from Q1 to Q2, then there would
be a shift in the supply of beer. Like a shift in the demand
curve, a shift in the supply curve implies that the original
supply curve has changed, meaning that the quantity supplied
is effected by a factor other than price. A shift in the supply
curve would occur if, for instance, a natural disaster caused a
15. mass shortage of hops; beer manufacturers would be forced to
supply less beer for the same price.