The document discusses the effects of changes in supply and demand. It shows a market initially in equilibrium with a price of $1 and quantity of 100 units. When demand decreases by 50%, the demand curve shifts left, creating a surplus as quantity supplied exceeds quantity demanded at the initial price. The price then decreases until equilibrium is restored with quantity supplied equal to quantity demanded.
1. The document discusses the key concepts and principles of Islamic economics according to various scholars and sources.
2. It outlines the basic principles of Islamic economics such as individual liberty, right to property, social equality, and prohibition of accumulation of wealth by certain groups.
3. Ibn Khaldun is highlighted as a pioneering thinker in economics who made important contributions centuries before Adam Smith, including theories on labor, value, demand and supply, prices, profits, growth, taxation, and foreign trade.
The document discusses the economic concept of supply. It defines supply as the quantity of a good or service that producers are willing and able to sell at a given price over a specific period of time. The document outlines several key determinants of supply, including the price of the good, prices of related goods and factors of production, producers' objectives, and external factors. It then presents the supply function and law of supply, which states that suppliers will provide a greater quantity at a higher price, all else being equal. The document concludes by explaining demand-supply equilibrium and how excess supply or demand can create inefficiencies in the market.
This document discusses consumer utility theory and how consumers make choices to maximize utility. It introduces concepts like total utility, marginal utility, diminishing marginal utility, and the principle that consumers will allocate their income in a way that equalizes marginal utility per dollar spent. It also examines how changes in a good's price can impact consumer choices through substitution and real income effects. Graphs and examples are provided to illustrate utility maximization and how it determines consumer demand.
Monopolistic competition describes a market structure with many small businesses that sell differentiated but similar products. While firms compete on price, they also engage in non-price competition through product differentiation, branding, and advertising. In the short run, firms maximize profits by producing where marginal revenue equals marginal cost. In the long run, free entry and exit causes average costs to equal prices as firms earn zero economic profit.
This document contains slides from a lecture on demand and supply in microeconomics. It introduces key concepts like demand curves, supply curves, and how equilibrium price and quantity are determined by the interaction of demand and supply in a market. The slides define demand and supply, explain the laws of demand and supply, and how shifts in demand or supply curves can occur due to changes in factors like price, income, tastes, technology or costs of production. The goal is for students to understand how prices and quantities are determined through supply and demand analysis.
1. The document discusses the key concepts and principles of Islamic economics according to various scholars and sources.
2. It outlines the basic principles of Islamic economics such as individual liberty, right to property, social equality, and prohibition of accumulation of wealth by certain groups.
3. Ibn Khaldun is highlighted as a pioneering thinker in economics who made important contributions centuries before Adam Smith, including theories on labor, value, demand and supply, prices, profits, growth, taxation, and foreign trade.
The document discusses the economic concept of supply. It defines supply as the quantity of a good or service that producers are willing and able to sell at a given price over a specific period of time. The document outlines several key determinants of supply, including the price of the good, prices of related goods and factors of production, producers' objectives, and external factors. It then presents the supply function and law of supply, which states that suppliers will provide a greater quantity at a higher price, all else being equal. The document concludes by explaining demand-supply equilibrium and how excess supply or demand can create inefficiencies in the market.
This document discusses consumer utility theory and how consumers make choices to maximize utility. It introduces concepts like total utility, marginal utility, diminishing marginal utility, and the principle that consumers will allocate their income in a way that equalizes marginal utility per dollar spent. It also examines how changes in a good's price can impact consumer choices through substitution and real income effects. Graphs and examples are provided to illustrate utility maximization and how it determines consumer demand.
Monopolistic competition describes a market structure with many small businesses that sell differentiated but similar products. While firms compete on price, they also engage in non-price competition through product differentiation, branding, and advertising. In the short run, firms maximize profits by producing where marginal revenue equals marginal cost. In the long run, free entry and exit causes average costs to equal prices as firms earn zero economic profit.
This document contains slides from a lecture on demand and supply in microeconomics. It introduces key concepts like demand curves, supply curves, and how equilibrium price and quantity are determined by the interaction of demand and supply in a market. The slides define demand and supply, explain the laws of demand and supply, and how shifts in demand or supply curves can occur due to changes in factors like price, income, tastes, technology or costs of production. The goal is for students to understand how prices and quantities are determined through supply and demand analysis.
The document discusses how demand and supply determine the price of goods and services in a market. It outlines several factors that affect demand, such as price, income, prices of other goods, tastes and fashion, and advertising. Factors affecting supply are also presented, including price, costs of production, prices of other goods, and technology. The document concludes that the market price is set at the point where the demand and supply curves intersect.
The document discusses the concept of perfect competition in three main points:
1. Perfect competition describes a market structure where competition is at its highest level, with many small firms, homogeneous products, free entry and exit, and perfect information.
2. Under perfect competition, firms aim to maximize profits by producing at the quantity where marginal revenue equals marginal cost.
3. In the long run, if profits are above normal, more firms will enter the market, increasing supply and driving prices and profits back down to normal.
This document discusses offer curves and how they can be used to analyze international trade. It contains the following key points:
1) An offer curve graphically represents the quantities of one good a country is willing to export in exchange for imports of another good at different price ratios, or terms of trade.
2) The derivation of a country's offer curve involves plotting its domestic cost line and determining the export-import combinations it can trade at different terms of trade.
3) The intersection of two countries' offer curves determines the terms of trade and trade quantities that will result from free trade between them. Shifts in the curves can also change the trade outcomes.
4) Gains from trade exist when
This presentation discusses price controls, specifically price ceilings and price floors. It provides examples of rent control as a price ceiling and minimum wage as a price floor. It analyzes the impact of binding versus non-binding price ceilings and floors. A binding price ceiling that sets a maximum price below the equilibrium price will result in a shortage. Similarly, a binding price floor that sets a minimum price above the equilibrium price will cause a surplus or unemployment. Price controls that are not binding have no impact on the market. The presentation evaluates that price ceilings can lead to shortages, rationing, and discrimination, while price floors can cause unemployment and ultimate loss for labor.
The document provides an overview of the Phillips curve, which shows the relationship between unemployment and inflation. It discusses the history of the Phillips curve developed by A.W. Phillips and debates around the short-run versus long-run curve. It also examines different types of inflation (cost-push, demand-pull) and unemployment (natural, structural, frictional, cyclical). Finally, it analyzes the relationship between inflation and unemployment and how policies aimed at reducing one may impact the other.
The document discusses the Solow growth model and how it can be used to analyze the effects of changes in saving and population growth rates on economic growth. It begins by introducing the basic Solow model framework, including the production function, capital accumulation equation, and steady state. It then shows graphically how the model transitions towards the steady state over time. The document also discusses how an increase in the saving rate leads to a higher steady state capital stock, output, and consumption. Finally, it analyzes the transition path following a reduction in the saving rate, with consumption initially rising but then capital, output, consumption, and investment falling as the economy moves to a new, lower steady state.
1. Inflation is a sustained increase in the general price level of goods, services and assets in an economy over a period of time. Its opposite phenomenon is deflation.
2. The main index used to measure inflation in Mongolia is the consumer price index, as calculated by the National Statistics Office.
3. Factors that typically contribute to inflation include increases in money supply, aggregate demand, costs of production, and import prices. Sustained high inflation is harmful to the economy.
Demand is defined as a consumer's desire and willingness to pay for a good or service. Demand depends on factors like price, income, tastes, and the prices of related goods. A demand function expresses the quantitative relationship between quantity demanded of a good and the various factors that influence demand. It shows the inverse relationship between price and quantity demanded - as price increases, quantity demanded decreases. The demand function can take the general form of Qd = a - bP, where a is the intercept, b is the slope, Qd is quantity demanded, and P is price. Factors like income, prices of substitutes and complements, tastes, expected future prices, and number of consumers impact the demand function and quantity demanded
This document contains multiple choice questions testing understanding of concepts related to supply and demand. It covers topics like the definition of wants vs demands, how demand and supply curves work, the law of demand and supply, equilibrium price and quantity, surpluses and shortages, shifts in demand and supply, substitutes and complements, and factors that influence demand and supply. The questions are testing comprehension of key economic ideas including how price impacts quantity demanded and supplied, the slope and position of demand and supply curves, and how equilibrium is established through market interactions of buyers and sellers.
The Law of Supply states that producers will supply more of a good when the price is higher and less when the price is lower. The supply curve shows the relationship between price and quantity supplied. Determinants of supply include input prices, number of competing firms, taxes, and technology. The law of diminishing returns notes that adding more of one factor of production while holding others constant will eventually decrease output per unit. Equilibrium price is where the quantity supplied meets the quantity demanded. Shortages and surpluses can occur away from this equilibrium. Price ceilings and floors are legal limits that may impact equilibrium.
Supply and Demand: Supply Increases and DecreasesGene Hayward
The document describes how a supply decrease of 50% impacts equilibrium in a market. Originally, equilibrium price was $1 and quantity was 100 units. With supply now 50% lower, there is a shortage at the original price, as suppliers can only provide 50 units while demand remains at 100 units. This disequilibrium creates pressure for the price to rise until it reaches a new equilibrium where quantity supplied meets quantity demanded.
Shifts In Demand And Supply And Market EquilibriumShikhar Bafna
1. APPLICATION OF DEMAND AND SUPPLY
2. MARKET EQUILIBRIUM
3. SHIFT IN DEMAND AND SUPPLY
+ABSTRACT OF TOPICS TO BE COVERED:
1. PRICE DETERMINATION UNDER PERFECT COMPETITION
2. EQULIBRIUM PRICE (PERFECT COMPETITION)
WITH THE HELP OF MARKET EQUILIBRIUM, MARKET DEMAND, MARKET SUPPLY AND THE EQUILIBRIUM BETWEEN DEMAND AND SUPPLY AND EFFECTS OF GOVERNMENT INTERVENTION ON MARKET PRICE.
3. EFFECTS OF SHIFT IN DEMAND AND SUPPLY ON EQUILIBRIUM PRICE AND QUANTITY
A.RIGHTWARD AND LEFTWARD SHIFT IN DEMAND
B.RIGHTWARD AND LEFTWARD SHIFT IN SUPPLY
C.SIMULTANEOUS RIGHTWARD AND LEFTWARD SHIFT IN BOTH DEMAND AND SUPPLY
WITH THE HELP OF GRAPHS FOR EACH CASE.
4. CAUSES OF SHIFT IN DEMAND CURVES
5. CAUSES OF SHIFT IN SUPPLY CURVES
The document discusses how demand and supply determine the price of goods and services in a market. It outlines several factors that affect demand, such as price, income, prices of other goods, tastes and fashion, and advertising. Factors affecting supply are also presented, including price, costs of production, prices of other goods, and technology. The document concludes that the market price is set at the point where the demand and supply curves intersect.
The document discusses the concept of perfect competition in three main points:
1. Perfect competition describes a market structure where competition is at its highest level, with many small firms, homogeneous products, free entry and exit, and perfect information.
2. Under perfect competition, firms aim to maximize profits by producing at the quantity where marginal revenue equals marginal cost.
3. In the long run, if profits are above normal, more firms will enter the market, increasing supply and driving prices and profits back down to normal.
This document discusses offer curves and how they can be used to analyze international trade. It contains the following key points:
1) An offer curve graphically represents the quantities of one good a country is willing to export in exchange for imports of another good at different price ratios, or terms of trade.
2) The derivation of a country's offer curve involves plotting its domestic cost line and determining the export-import combinations it can trade at different terms of trade.
3) The intersection of two countries' offer curves determines the terms of trade and trade quantities that will result from free trade between them. Shifts in the curves can also change the trade outcomes.
4) Gains from trade exist when
This presentation discusses price controls, specifically price ceilings and price floors. It provides examples of rent control as a price ceiling and minimum wage as a price floor. It analyzes the impact of binding versus non-binding price ceilings and floors. A binding price ceiling that sets a maximum price below the equilibrium price will result in a shortage. Similarly, a binding price floor that sets a minimum price above the equilibrium price will cause a surplus or unemployment. Price controls that are not binding have no impact on the market. The presentation evaluates that price ceilings can lead to shortages, rationing, and discrimination, while price floors can cause unemployment and ultimate loss for labor.
The document provides an overview of the Phillips curve, which shows the relationship between unemployment and inflation. It discusses the history of the Phillips curve developed by A.W. Phillips and debates around the short-run versus long-run curve. It also examines different types of inflation (cost-push, demand-pull) and unemployment (natural, structural, frictional, cyclical). Finally, it analyzes the relationship between inflation and unemployment and how policies aimed at reducing one may impact the other.
The document discusses the Solow growth model and how it can be used to analyze the effects of changes in saving and population growth rates on economic growth. It begins by introducing the basic Solow model framework, including the production function, capital accumulation equation, and steady state. It then shows graphically how the model transitions towards the steady state over time. The document also discusses how an increase in the saving rate leads to a higher steady state capital stock, output, and consumption. Finally, it analyzes the transition path following a reduction in the saving rate, with consumption initially rising but then capital, output, consumption, and investment falling as the economy moves to a new, lower steady state.
1. Inflation is a sustained increase in the general price level of goods, services and assets in an economy over a period of time. Its opposite phenomenon is deflation.
2. The main index used to measure inflation in Mongolia is the consumer price index, as calculated by the National Statistics Office.
3. Factors that typically contribute to inflation include increases in money supply, aggregate demand, costs of production, and import prices. Sustained high inflation is harmful to the economy.
Demand is defined as a consumer's desire and willingness to pay for a good or service. Demand depends on factors like price, income, tastes, and the prices of related goods. A demand function expresses the quantitative relationship between quantity demanded of a good and the various factors that influence demand. It shows the inverse relationship between price and quantity demanded - as price increases, quantity demanded decreases. The demand function can take the general form of Qd = a - bP, where a is the intercept, b is the slope, Qd is quantity demanded, and P is price. Factors like income, prices of substitutes and complements, tastes, expected future prices, and number of consumers impact the demand function and quantity demanded
This document contains multiple choice questions testing understanding of concepts related to supply and demand. It covers topics like the definition of wants vs demands, how demand and supply curves work, the law of demand and supply, equilibrium price and quantity, surpluses and shortages, shifts in demand and supply, substitutes and complements, and factors that influence demand and supply. The questions are testing comprehension of key economic ideas including how price impacts quantity demanded and supplied, the slope and position of demand and supply curves, and how equilibrium is established through market interactions of buyers and sellers.
The Law of Supply states that producers will supply more of a good when the price is higher and less when the price is lower. The supply curve shows the relationship between price and quantity supplied. Determinants of supply include input prices, number of competing firms, taxes, and technology. The law of diminishing returns notes that adding more of one factor of production while holding others constant will eventually decrease output per unit. Equilibrium price is where the quantity supplied meets the quantity demanded. Shortages and surpluses can occur away from this equilibrium. Price ceilings and floors are legal limits that may impact equilibrium.
Supply and Demand: Supply Increases and DecreasesGene Hayward
The document describes how a supply decrease of 50% impacts equilibrium in a market. Originally, equilibrium price was $1 and quantity was 100 units. With supply now 50% lower, there is a shortage at the original price, as suppliers can only provide 50 units while demand remains at 100 units. This disequilibrium creates pressure for the price to rise until it reaches a new equilibrium where quantity supplied meets quantity demanded.
Shifts In Demand And Supply And Market EquilibriumShikhar Bafna
1. APPLICATION OF DEMAND AND SUPPLY
2. MARKET EQUILIBRIUM
3. SHIFT IN DEMAND AND SUPPLY
+ABSTRACT OF TOPICS TO BE COVERED:
1. PRICE DETERMINATION UNDER PERFECT COMPETITION
2. EQULIBRIUM PRICE (PERFECT COMPETITION)
WITH THE HELP OF MARKET EQUILIBRIUM, MARKET DEMAND, MARKET SUPPLY AND THE EQUILIBRIUM BETWEEN DEMAND AND SUPPLY AND EFFECTS OF GOVERNMENT INTERVENTION ON MARKET PRICE.
3. EFFECTS OF SHIFT IN DEMAND AND SUPPLY ON EQUILIBRIUM PRICE AND QUANTITY
A.RIGHTWARD AND LEFTWARD SHIFT IN DEMAND
B.RIGHTWARD AND LEFTWARD SHIFT IN SUPPLY
C.SIMULTANEOUS RIGHTWARD AND LEFTWARD SHIFT IN BOTH DEMAND AND SUPPLY
WITH THE HELP OF GRAPHS FOR EACH CASE.
4. CAUSES OF SHIFT IN DEMAND CURVES
5. CAUSES OF SHIFT IN SUPPLY CURVES
The document provides an overview of supply and demand, including:
1. It defines demand as desire for a commodity backed by ability and willingness to pay, and defines the law of demand which states that quantity demanded varies inversely with price.
2. It also defines supply as the quantity firms choose to sell given a price, and defines the law of supply which states that quantity supplied varies directly with price.
3. It explains the determination of market equilibrium where the supply and demand curves intersect, and how various factors can cause the curves to shift, changing the equilibrium price and quantity.
The document provides instructions for how to draw a perfect graph. It explains that a perfect graph is a graph in which all vertices have the same degree and every two non-adjacent vertices have the same number of common neighbors. The steps to draw a perfect graph involve first determining the number of vertices and degree, then connecting each vertex to other vertices while maintaining the properties of a perfect graph.
1) The document discusses demand and supply functions in a market system. It provides details on individual demand functions, market demand functions, and how they are constructed.
2) A change in quantity demanded refers to movement along the demand curve from a change in price, while a change in demand is a shift of the entire demand curve caused by non-price factors.
3) The supply function models the behavior of producers and depends on price, input prices, technology, number of sellers, and other factors. It represents the quantity supplied at different price levels.
There are five key demand shifters and seven supply shifters that impact the demand and supply curves in a market. The five demand shifters are: 1) changes in tastes and preferences, 2) changes in income, 3) changes in population size, 4) consumer expectations about future prices and income, and 5) prices of related goods. The seven supply shifters are: 1) resource costs, 2) prices of alternative goods, 3) technology improvements, 4) number of suppliers, 5) producer expectations about future prices, 6) subsidies from the government, and 7) taxes imposed on businesses. A change in any of these underlying factors will cause the demand or supply curve to shift, resulting in a new equilibrium price
Social welfare is maximum in case of imperfect competitionAkeeb Siddiqui
There are two main approaches to welfare economics: the early neoclassical approach and the new welfare economics approach. The early approach assumes cardinal utility can be measured, while the new approach uses ordinal utility and Pareto efficiency. Perfect competition occurs when many small buyers and sellers trade homogeneous goods, while imperfect competition arises when firms have some control over prices through monopolies, oligopolies, or natural monopolies sanctioned by governments. Imperfectly competitive markets can result in inefficiencies like deadweight loss compared to perfectly competitive markets.
The document discusses simultaneous changes in demand and supply for bacon in Alberta. It begins by showing the original supply and demand curves for bacon, with an equilibrium price of $5.25 per kilo and quantity of 13-14 units. It then provides examples of factors that could increase demand or supply. It explains that when both increase or decrease, quantity traded will change in a determinate direction but price may be indeterminate. When demand increases and supply decreases, or vice versa, price will change in a determinate direction but quantity may be indeterminate. The key effects of simultaneous demand and supply changes on price and quantity are summarized.
The document describes the circular flow of economic activity through different economic models. The basic 2-sector circular flow model shows the reciprocal relationship between households and firms, with households supplying factors of production and buying goods/services, and firms using factors of production and selling goods/services. A 5-sector model adds the financial, government, and international sectors and considers injections and leakages that impact equilibrium. The models demonstrate how income and spending circulate through an economy at both the micro and macro levels.
This document provides an overview of welfare economics. It discusses key concepts like demand and supply curves, consumer and producer surplus, deadweight loss, price controls, externalities, and the invisible hand theorem. It also covers Arthur Pigou's work on externalities and the Pigouvian tax. The compensation principle is explained as a decision rule for selecting between social states. Two case studies on the compensation principle and gasoline taxes are also presented. The document concludes with a brief mention of Amartya Sen's contributions to welfare economics through his utilitarian approach.
Consumer surplus is the difference between the maximum price a consumer is willing to pay for a good and the actual market price paid. Total consumer surplus is the sum of the surpluses of all consumers in the market. It can be represented by the area above the market price and below the demand curve. If the price increases, total consumer surplus decreases as less of the demand curve is above the new, higher price.
Producer surplus is the difference between the market price received by a producer and the producer's marginal cost of production. Total producer surplus is the sum of the surpluses of all producers in the market. It can be represented by the area above marginal cost and below the supply curve.
The total surplus
Chapter 1: Social Welfare, Past and Present uafswk
What is social welfare?
The full range of organized activities of public and
voluntary agencies that seek to prevent, alleviate or
contribute to the solution of a selected set of social
problems
This document discusses the tradeoff between efficiency and equality in markets and the economy. It explains that while competitive markets allocate resources efficiently according to consumer preferences, they do not necessarily produce equal outcomes. There are two main views on fairness - that results should be fair, requiring redistribution, and that rules should be fair allowing for unequal results from equal opportunity. Redistribution aims to make the poorest better off but reduces the overall size of the economic pie due to reduced incentives and higher costs of redistribution programs.
1) Welfare economics is concerned with measuring living standards and utility. It uses Pareto efficiency as a standard to determine if a resource allocation is efficient.
2) For an allocation to be Pareto efficient, it must satisfy three conditions: efficiency in consumption, efficiency in production, and product-mix efficiency.
3) A social welfare function can be used to rank different allocations and determine the allocation that provides the highest overall welfare. Utilitarian and Rawlsian approaches provide different forms for the social welfare function.
The document discusses the concept of perfect competition. It defines perfect competition as a market with many small firms, homogeneous products, free entry and exit, and perfect information. Under perfect competition in the short run, firms are price takers and will produce at the price that maximizes their profits where marginal revenue equals marginal cost. In the long run, perfectly competitive firms will earn only normal profits as entry and exit will cause prices to adjust until average costs are equal to prices.
Welfare economics deals with topics related to economic growth and development, such as justice, equity, freedom, and individual welfare. It assumes individuals are the best judges of their own welfare. Economic growth refers to an increase in per capita income, while economic development is a process whereby real per capita income increases over time. Development theories include the Harrod-Domar model, exogenous growth model, surplus labor model, and Rostow's stages of growth model. Measuring national income can be done via the product, expenditure, and income methods. The expenditure method defines national income as the total of consumption, investment, government spending, and net exports.
The document discusses the law of supply and demand. It explains that the equilibrium price and quantity of a good is determined by the intersection of the demand and supply curves. The demand for a good is influenced by factors like price, income, tastes, and prices of substitutes and complements. The supply is influenced by factors like production costs, input prices, and technology. Changes in demand or supply can shift the curves and result in a new equilibrium price and quantity. Price floors and ceilings are ineffective in the long run as they create surpluses or shortages.
The document discusses the model of perfect competition. It outlines the key assumptions behind a perfectly competitive market, including many suppliers and buyers, homogeneous products, perfect information and no barriers to entry or exit. It also examines characteristics such as firms being price takers. The model shows how markets reach a long-run equilibrium where price equals average cost and normal profits are earned. Perfect competition is said to promote both productive and allocative efficiency. However, the model is largely theoretical as very few real world markets exhibit all the strict assumptions of perfect competition.
This document discusses Samuelson's social welfare function approach to welfare economics. It introduces key concepts like Pareto optimality, social indifference curves, utility possibility curves, and the grand utility possibility frontier. The key point is that Samuelson's model finds a unique point of constrained bliss where social welfare is maximized, taking into account both individual utility levels and aggregate production possibilities. This point satisfies efficiency conditions and maximizes the social welfare function subject to resource constraints.
1. Welfare economics analyzes how economic policies affect overall social welfare. Classical welfare economics assumed welfare was additive and could be quantitatively measured and compared between individuals.
2. New welfare economics is normative rather than positive and recognizes welfare cannot be cardinally measured, only ordinally. It compares the relative social welfare of different economic states. Scholars like Hicks, Pigou, Kaldor and Scitovsky contributed to developing new welfare economics.
3. The Hicks-Kaldor compensation principle states that if one group gains from a policy change while another loses, but the gainers could potentially compensate the losers and still be better off, then the change increases social welfare. Scitovsky
Supply and Demand Together. Shift of Demand CurveGene Hayward
This document discusses how supply and demand interact in a market when demand increases or decreases. When demand increases, the demand curve shifts to the right, creating a shortage at the original price. The price rises until quantity demanded and supplied are equal again, eliminating the shortage. When demand decreases, the demand curve shifts left, creating a surplus. The price falls until quantity demanded again equals quantity supplied. In both cases, the invisible hand of the market works through price adjustments to clear the market.
The document describes how a 50% decrease in supply from the original equilibrium would impact the market. With the supply curve shifting left to Supply 1, at the original price of $1 there is now a shortage as quantity demanded exceeds quantity supplied. This disequilibrium will cause price to rise until it reaches a new equilibrium where quantity demanded equals quantity supplied along the new supply curve.
Income Effect and Substitution Effect primer.Gene Hayward
1) A decrease in the price of a good leads to an increase in the quantity demanded along the demand curve due to the income effect. Consumers can now buy more of the good with their unchanged income since it has greater purchasing power at the lower price.
2) An increase in the price of a good leads to a decrease in the quantity demanded along the demand curve due to the income effect. Consumers can now buy less of the good with their unchanged income since it has lower purchasing power at the higher price.
3) When the price of a substitute good changes relative to another, it leads to a change in the quantity demanded of the other good along its demand curve due to the substitution effect
The document discusses market equilibrium and how prices are determined. It defines equilibrium price as the price where quantity supplied equals quantity demanded and where excess demand is zero. It explains that excess demand or excess supply exists when the quantities are not equal at the current price, and that prices will tend to rise with excess demand and fall with excess supply. Various diagrams demonstrate these concepts for a market of tacos. The equilibrium price and quantity for tacos is identified in one diagram.
The document discusses supply and demand fundamentals including:
1. It defines supply and demand as the amounts that consumers are willing/able to buy (demand) and that producers are willing/able to sell (supply) at various prices.
2. The law of demand and law of supply state that demand is inversely related to price while supply is directly related.
3. Equilibrium occurs when quantity demanded equals quantity supplied at the equilibrium price.
4. Disequilibrium can occur in the form of shortages when price is below equilibrium or surpluses when price is above. The market works to move back to equilibrium.
The document discusses supply and demand. It defines demand as the quantity consumers are willing and able to purchase at different prices. The law of demand states that quantity demanded increases when price decreases. Demand can shift due to factors like income, tastes, or prices of substitutes. Supply is defined as the quantity producers are willing to supply at different prices. The law of supply states that quantity supplied increases when price increases. Supply can shift due to costs of production, number of producers, or technology. Equilibrium occurs where quantity supplied equals quantity demanded. Disequilibrium results in shortages or surpluses which push prices toward the equilibrium level.
Similar to Supply and Demand: Demand Increase and Decrease (6)
This document discusses the difference between normal profits and economic profits from an economist's perspective. Normal profits account for both explicit costs like wages and utilities as well as implicit opportunity costs of forgone earnings. Economic profits are any profits above normal profits. The example shows that while accounting profits were $57,000, when implicit opportunity costs of $28,000 are considered, economic profits were only $29,000, indicating the business was performing well but not extraordinarily. Positive economic profits signal other entrepreneurs may enter the market, while negative economic profits signal entrepreneurs may exit the industry.
- Economists measure utility or satisfaction derived from consuming goods and services. Utility is maximized when marginal utility per dollar spent is highest.
- Using a hot dog and hamburger example, the document defines total utility, marginal utility, and marginal utility per dollar spent.
- With $10 to spend, the optimal purchase maximizes utility by first buying hamburgers, which have a higher marginal utility per dollar, until spending is maximized.
Elasticity of Demand and Supply (longer edition)Gene Hayward
Elasticity measures the responsiveness of consumers or producers to changes in price. It is calculated as the percentage change in quantity divided by the percentage change in price. Demand is elastic if this value is greater than 1, inelastic if less than 1, and unit elastic if equal to 1. There are several factors that determine the elasticity of demand such as availability of substitutes, proportion of income spent, and whether the good is a necessity or luxury. Elasticity can be calculated between two points on a demand curve using the midpoint formula. The total revenue test also helps determine elasticity based on whether total revenue increases or decreases with a price change.
The document discusses the concept of elasticity of demand. It defines elasticity of demand as the percentage change in quantity demanded divided by the percentage change in price. An elastic demand means this ratio is greater than 1, an inelastic demand means the ratio is less than 1, and a unit elastic demand means the ratio equals 1. The document then discusses how the slope of a demand curve relates to its elasticity, with flatter curves being more elastic and steeper curves being less elastic. It also introduces the total revenue test for elasticity and other types of elasticity like cross-price and income elasticity.
The document discusses the US balance of payments, which accounts for all transactions between US residents and residents of other countries. It includes exports and imports of goods and services, as well as investment income and capital flows. The balance of payments has two main components - the current account, which covers trade and investment income, and the capital account, which covers capital transactions. The document provides examples and dollar amounts for various items in the US 2008 balance of payments, including exports, imports, investment income payments and receipts, and unilateral transfers. It notes that the current account and capital account must always balance in the end.
The document discusses the market for loanable funds and how government deficit spending can impact interest rates in this market. It begins by explaining that the market for loanable funds represents the financial system where those with surplus funds (the supply of loanable funds) lend to those who want to borrow funds (the demand for loanable funds). The equilibrium real interest rate is established where the supply and demand for loanable funds are equal. The document then states that if the government engages in deficit spending and borrows in the market for loanable funds, it increases the demand for funds and puts upward pressure on interest rates. This causes private borrowing by consumers and businesses to decrease, known as the "crowding out effect." The extent of
PPF Constant and Increasing Opportunity CostsGene Hayward
The document discusses the benefits of exercise for mental health. Regular physical activity can help reduce anxiety and depression and improve mood and cognitive functioning. Exercise causes chemical changes in the brain that may help protect against mental illness and improve symptoms.
The document provides information about the foreign exchange market (FOREX). It explains that currencies are traded between countries and factors like preferences, quality, prices, incomes, and interest rates can impact currency exchange rates. The FOREX is represented worldwide and currencies are subjected to supply and demand. When factors change, it can cause one currency to appreciate or depreciate relative to another currency, impacting exports and imports between the two countries.
This document discusses the difference between normal profits and economic profits from an economist's perspective. Normal profits account for both explicit costs like wages and utilities as well as implicit opportunity costs of forgone earnings. Economic profits are any profits above normal profits. The example shows that while accounting profits were $57,000, when implicit opportunity costs of $28,000 are considered, economic profits were $29,000, indicating the business owner was allocating resources efficiently. Positive economic profits signal other entrepreneurs may enter the market, while negative economic profits signal entrepreneurs may exit the industry.
The document discusses labor markets under conditions of perfect competition for goods and labor. It analyzes how a firm's demand for labor (derived demand) is determined by the marginal revenue product of labor curve. This curve can shift due to changes in productivity or price of the good produced. An increase in either factor causes the curve to shift right and increases labor demand. The firm hires workers up to the point where the wage rate equals marginal revenue product. The document also examines how the firm responds to changes in the market wage rate, hiring more workers if wages decrease and fewer workers if they increase.
The document discusses the Keynesian multiplier effect, which posits that a change in spending or taxes can have a multiplied impact on GDP. It provides examples to illustrate how:
1) An initial $1 spent can increase GDP by $2 through subsequent rounds of spending as each dollar is spent and re-spent, with each person tending to save a portion.
2) A government spending increase of $10 billion can boost GDP by $100 billion, according to the government spending multiplier formula of 1/MPS.
3) A tax cut of $10 billion can increase GDP by $90 billion, according to the tax cut multiplier formula of -MPC/MPS, which has a smaller impact
"OOO" Method to calculate Comparative AdvantageGene Hayward
The document outlines the opportunity costs of corn and wheat production in the US and Brazil. It shows that in the US, the opportunity cost of 1 bushel of corn is 2 bushels of wheat, while the opportunity cost of 1 bushel of wheat is 1/2 bushel of corn. In Brazil, the opportunity cost of 1 bushel of corn is 3 bushels of wheat, while the opportunity cost of 1 bushel of wheat is 1/3 bushel of corn. This information can be used to determine which country has a comparative advantage and will likely specialize in and export each good.
The document compares corn and wheat production in the US and Brazil. It shows that in the US, 1 acre of corn has an opportunity cost of 0.5 acres of wheat, while 1 acre of wheat has an opportunity cost of 2 acres of corn. In Brazil, 1 acre of corn has an opportunity cost of 0.33 acres of wheat, while 1 acre of wheat has an opportunity cost of 3 acres of corn. This indicates that Brazil has a comparative advantage in and likely specializes in corn production and exports corn, while importing wheat.
The document discusses the concepts of absolute and comparative advantage between two hypothetical countries, Country A and Country B, that produce only two goods: cloth and wine. It shows that while Country B has an absolute advantage in producing both goods, it has a comparative advantage in cloth while Country A has a comparative advantage in wine due to their opportunity costs of production. This allows for gains from specialization and trade where Country B specializes in cloth and Country A in wine. An acceptable terms of trade is determined between the countries' opportunity costs that makes both better off through trade.
The document discusses how a shift in the supply curve of butter from Supply* to Supply1, representing an increase in the cost of a vital input. This causes the market for butter to move from an initial equilibrium at point A, with price Pe and quantity Qe, to a new equilibrium. With the higher costs, the supply curve shifts leftward to Supply1. The market attempts to price butter at the initial price P1, but this creates a surplus as the quantity supplied at B exceeds the quantity demanded at E. Economic theory suggests the price will decrease to clear the market, moving along the demand and supply curves until a new equilibrium is reached at point C, with a higher price P2 and quantity Q1.
The document discusses the market for meat products and how the private costs of production and private benefits of consumption do not account for external environmental costs. It suggests the socially optimal level of meat production is below the current market equilibrium level. To better align supply and demand with social costs and benefits, a tax could be imposed on producers to internalize environmental costs by shifting the supply curve leftward, resulting in a lower equilibrium quantity and price that covers true societal costs. This tax captures the deadweight loss from current production exceeding marginal social benefits.
The document discusses production possibilities frontiers and comparative advantage in international trade. It explains that a production possibilities frontier (PPF) shows the maximum quantities of two goods an economy can produce given limited resources, and that different shaped PPFs indicate different opportunity costs of production. The document then uses an example of two countries, A and B, to illustrate how both can benefit from specializing in and trading the good each has a comparative advantage in, even if one country has an absolute advantage in both goods. Through determining acceptable terms of trade based on each country's opportunity costs, both countries can consume beyond their PPFs.
A document outlines key concepts regarding monopoly, including:
1) A monopoly is characterized by a single seller in the market with no close substitutes who acts as a price maker and can block entry of new competitors.
2) A monopoly faces a downward sloping demand curve and can only increase sales by lowering price across all units sold. As a result, marginal revenue is always below price.
3) A profit-maximizing monopoly will produce at the quantity where marginal revenue equals marginal cost and charge the price dictated by the demand curve at that quantity of output.
The document discusses absolute and comparative advantage between two countries, A and B, that produce cloth and wine. Country A can produce more wine but less cloth than Country B. Country B can produce more cloth but the same amount of wine as Country A. It is determined that Country B has a comparative advantage in cloth production since it has a lower opportunity cost than Country A. Country A has a comparative advantage in wine production as it has a lower opportunity cost than Country B. Therefore, both countries would benefit from specializing in what they have a comparative advantage in and trading - Country B should focus on cloth while Country A focuses on wine.
Canadian Wall Board (Sheet Rock) TariffGene Hayward
The document discusses the market for wall board in Canada. It describes how the market was initially in equilibrium with domestic production at a certain price. When US exporters offered wall board at a lower international price, imports increased which decreased domestic production and employment. In response, domestic producers lobbied for a tariff to be imposed on imports. The tariff increased imports' price and reduced imports. This allowed domestic production and employment to increase but also reduced consumer surplus through higher wall board prices.
A Visual Guide to 1 Samuel | A Tale of Two HeartsSteve Thomason
These slides walk through the story of 1 Samuel. Samuel is the last judge of Israel. The people reject God and want a king. Saul is anointed as the first king, but he is not a good king. David, the shepherd boy is anointed and Saul is envious of him. David shows honor while Saul continues to self destruct.
Elevate Your Nonprofit's Online Presence_ A Guide to Effective SEO Strategies...TechSoup
Whether you're new to SEO or looking to refine your existing strategies, this webinar will provide you with actionable insights and practical tips to elevate your nonprofit's online presence.
Temple of Asclepius in Thrace. Excavation resultsKrassimira Luka
The temple and the sanctuary around were dedicated to Asklepios Zmidrenus. This name has been known since 1875 when an inscription dedicated to him was discovered in Rome. The inscription is dated in 227 AD and was left by soldiers originating from the city of Philippopolis (modern Plovdiv).
🔥🔥🔥🔥🔥🔥🔥🔥🔥
إضغ بين إيديكم من أقوى الملازم التي صممتها
ملزمة تشريح الجهاز الهيكلي (نظري 3)
💀💀💀💀💀💀💀💀💀💀
تتميز هذهِ الملزمة بعِدة مُميزات :
1- مُترجمة ترجمة تُناسب جميع المستويات
2- تحتوي على 78 رسم توضيحي لكل كلمة موجودة بالملزمة (لكل كلمة !!!!)
#فهم_ماكو_درخ
3- دقة الكتابة والصور عالية جداً جداً جداً
4- هُنالك بعض المعلومات تم توضيحها بشكل تفصيلي جداً (تُعتبر لدى الطالب أو الطالبة بإنها معلومات مُبهمة ومع ذلك تم توضيح هذهِ المعلومات المُبهمة بشكل تفصيلي جداً
5- الملزمة تشرح نفسها ب نفسها بس تكلك تعال اقراني
6- تحتوي الملزمة في اول سلايد على خارطة تتضمن جميع تفرُعات معلومات الجهاز الهيكلي المذكورة في هذهِ الملزمة
واخيراً هذهِ الملزمة حلالٌ عليكم وإتمنى منكم إن تدعولي بالخير والصحة والعافية فقط
كل التوفيق زملائي وزميلاتي ، زميلكم محمد الذهبي 💊💊
🔥🔥🔥🔥🔥🔥🔥🔥🔥
THE SACRIFICE HOW PRO-PALESTINE PROTESTS STUDENTS ARE SACRIFICING TO CHANGE T...indexPub
The recent surge in pro-Palestine student activism has prompted significant responses from universities, ranging from negotiations and divestment commitments to increased transparency about investments in companies supporting the war on Gaza. This activism has led to the cessation of student encampments but also highlighted the substantial sacrifices made by students, including academic disruptions and personal risks. The primary drivers of these protests are poor university administration, lack of transparency, and inadequate communication between officials and students. This study examines the profound emotional, psychological, and professional impacts on students engaged in pro-Palestine protests, focusing on Generation Z's (Gen-Z) activism dynamics. This paper explores the significant sacrifices made by these students and even the professors supporting the pro-Palestine movement, with a focus on recent global movements. Through an in-depth analysis of printed and electronic media, the study examines the impacts of these sacrifices on the academic and personal lives of those involved. The paper highlights examples from various universities, demonstrating student activism's long-term and short-term effects, including disciplinary actions, social backlash, and career implications. The researchers also explore the broader implications of student sacrifices. The findings reveal that these sacrifices are driven by a profound commitment to justice and human rights, and are influenced by the increasing availability of information, peer interactions, and personal convictions. The study also discusses the broader implications of this activism, comparing it to historical precedents and assessing its potential to influence policy and public opinion. The emotional and psychological toll on student activists is significant, but their sense of purpose and community support mitigates some of these challenges. However, the researchers call for acknowledging the broader Impact of these sacrifices on the future global movement of FreePalestine.
Level 3 NCEA - NZ: A Nation In the Making 1872 - 1900 SML.pptHenry Hollis
The History of NZ 1870-1900.
Making of a Nation.
From the NZ Wars to Liberals,
Richard Seddon, George Grey,
Social Laboratory, New Zealand,
Confiscations, Kotahitanga, Kingitanga, Parliament, Suffrage, Repudiation, Economic Change, Agriculture, Gold Mining, Timber, Flax, Sheep, Dairying,
A Free 200-Page eBook ~ Brain and Mind Exercise.pptxOH TEIK BIN
(A Free eBook comprising 3 Sets of Presentation of a selection of Puzzles, Brain Teasers and Thinking Problems to exercise both the mind and the Right and Left Brain. To help keep the mind and brain fit and healthy. Good for both the young and old alike.
Answers are given for all the puzzles and problems.)
With Metta,
Bro. Oh Teik Bin 🙏🤓🤔🥰
How to Manage Reception Report in Odoo 17Celine George
A business may deal with both sales and purchases occasionally. They buy things from vendors and then sell them to their customers. Such dealings can be confusing at times. Because multiple clients may inquire about the same product at the same time, after purchasing those products, customers must be assigned to them. Odoo has a tool called Reception Report that can be used to complete this assignment. By enabling this, a reception report comes automatically after confirming a receipt, from which we can assign products to orders.
1. NOTE: If during the power-point transitions the slides appear “Jumpy” well…they
Are…My PPT skills are very average …it is the best I can do…Bear with me…
Supply AND Demand Together
Time to get slapped upside the head with
“The Invisible Hand”
2. Price
of
___
Market for _______________
Supply*
Demand*
Quantity of _________
Pe
Qe
3. Supply and Demand
Demand INCREASES
Price
of
___
Quantity of _________
Supply*
Demand*
100
$1.00
NOW: Something in this
Market causes DEMAND
To INCREASE by 50%.
Qd=Qs
4. Supply and Demand
Demand INCREASES
Price
of
___
Quantity of _________
Supply*
100
$1.00
This means that at EVERY GIVEN
PRICE the Quantity Demanded is
Going to be 50% more.
Qd=Qs
Demand*
5. Supply and Demand
Demand INCREASES
Price
of
___
+50%
+50%
Quantity of _________
Supply*
100
$1.00
150
Qd=Qs
This means that at EVERY GIVEN
PRICE relative to Demand* the
Quantity Demanded is going to be
50% more.
$2.00
$.50
+50%
Demand* Demand 1
50 75 225
6. Supply and Demand
Demand INCREASES
Price
of
___
Quantity of _________
Supply*
100
$1.00
150
Qd=Qs
Now we have a NEW Demand Curve
Demand 1
The Demand Curve has
shifted to the RIGHT
$2.00
$.50
Demand* Demand 1
50 75 225
7. Supply and Demand
Demand INCREASES
Price
of
___
Quantity of _________
Supply*
Let’s assume for the moment
that the PRICE does NOT
change in reaction to this
INCREASE in DEMAND
Demand*
100
$1.00
150
Qd=Qs
$2.00
$.50
50 75 225
Demand 1
8. Supply and Demand
Demand INCREASES
Price
of
___
Quantity of _________
Supply*
At a price of $1.00 the Quantity
Demanded is going to be 150 BUT at a
price of $1.00 there is still going to be
a Quantity Supplied of 100. OUR
MARKET IS IN DIS-EQUILIBRIUM!!
Demand*
100
$1.00
150
Qd=Qs
$2.00
$.50
50 75 225
Demand 1
9. Supply and Demand
Demand INCREASES
Price
of
___
Quantity of _________
Supply*
At this Price and Quantity Demanded
There is no market---The Market
Suppliers are NOT going to Supply that
Quantity at that price. Quantity
Demanded is GREATER than Quantity
Supplied
Demand*
100
$1.00
150
Qd=Qs
$2.00
$.50
50 75 225
Demand 1
Qs-100 Qd=150 Notice: Quantity Demanded
Is greater than Quantity Supplied
At this price
10. Supply and Demand
Demand INCREASES
Price
of
___
Quantity of _________
Supply*
Why are Producers NOT going to
supply 150 units at $1.00? Because
to produce that additional 50 units
it is going to cost them more in
labor, materials, etc…To produce
the additional 50 units they are
going to have to get a higher
price!!!
Demand*
100
$1.00
150
Qd=Qs
$2.00
$.50
50 75 225
Demand 1
Qs-100 Qd=150 Notice: Quantity Demanded
Is greater than Quantity Supplied
At this price
11. Supply and Demand
Demand INCREASES
Price
of
___
Quantity of _________
Supply*
We have a SHORTAGE in the Market!
Demand*
100
$1.00
150
Qd=Qs
$2.00
$.50
50 75 225
Demand 1
Qs-100 Qd=150 Notice: Quantity Demanded
Is greater than Quantity Supplied
At this price
SShhoortrataggee
12. Supply and Demand
Demand INCREASES
Price
of
___
Quantity of _________
Supply*
How do we eliminate this SHORTAGE?
Adam Smith said “the Invisible Hand”
Of the market will work to shrink the
Shortage.
Demand*
100
$1.00
150
Qd=Qs
$2.00
$.50
50 75 225
Demand 1
Qs-100 Qd=150 Notice: Quantity Demanded
Is greater than Quantity Supplied
At this price
SShhoortrataggee
13. Supply and Demand
Demand INCREASES
Price
of
___
Quantity of _________
Supply*
This is where it is crucial to understand
the difference between a CHANGE in
DEMAND or Supply vs a CHANGE in
Quantity Demanded or Quantity
Supplied
Demand*
100
$1.00
150
Qd=Qs
$2.00
$.50
50 75 225
Demand 1
Qs-100 Qd=150 Notice: Quantity Demanded
Is greater than Quantity Supplied
At this price
14. Supply and Demand
Demand INCREASES
Price
of
___
Quantity of _________
Supply*
With our change in DEMAND
finished we now turn the focus to
MOVEMENTS along our new
DEMAND CURVE Relative to
MOVEMENTS along our SUPPLY
CURVE…PRICE is going to dictate our
changes in Quantity Demanded AND
changes in Quantity Supplied
Demand*
100
$1.00
150
Qd=Qs
$2.00
$.50
50 75 225
Demand 1
Qs-100 Qd=150 Notice: Quantity Demanded
Is greater than Quantity Supplied
At this price
15. Supply and Demand
Demand INCREASES
Price
of
___
Quantity of _________
Supply*
Demand*
100
$1.00
150
Qd=Qs
$2.00
$.50
50 75 225
Demand 1
Qs-100 Qd=150
Because there is a SHORTAGE in this
market, the pressure on the price of
the good is going to be UPWARD.
Let’s assume the Price INCREASES
to $1.20.
16. Supply and Demand
Demand INCREASES
Price
of
___
Quantity of _________
Supply*
Demand*
100
$1.00
150
Qd=Qs
$2.00
$.50
50 75 225
Demand 1
Qs-100 Qd=150
At $1.20 the Quantity Demanded
(dictated by DEMAND 1) is 135 AND
the Quantity Supplied (Dictated by
Supply*) in 115.
$1.20
115 135
17. Supply and Demand
Demand INCREASES
Price
of
___
Shortage
Quantity of _________
Supply*
Demand*
100
$1.00
150
Qd=Qs
$2.00
$.50
50 75 225
Demand 1
Qs-100 Qd=150
We are STILL not in Market
Equilibrium…Quantity Demanded
(135) is GREATER than Quantity
Supplied (115)…A Shortage STILL
exists in this market. The gap has
closed some, but we are not in
Market Equilibrium yet where
Qd=Qs.
$1.20
135
115
18. Supply and Demand
Demand INCREASES
Price
of
___
Quantity of _________
Supply*
Demand*
100
$1.00
150
Qd=Qs
$2.00
$.50
50 75 225
Demand 1
Qs-100 Qd=150
The pressure on the price is going to
continue...Can you see where we
are heading???? The SHORTAGE
will only be cleared when we reach
the intersection of Demand and
Supply!!
$1.20
115 135
19. Supply and Demand
Demand INCREASES
Price
of
___
Quantity of _________
Supply*
Demand*
100
$1.00
150
Qd=Qs
$2.00
$.50
50 75 225
Demand 1
Qs-100 Qd=150
Some Demanders are falling by the
wayside because as the price
increases the quantity demanded
decreases (Law of Demand).
$1.20
115 135
20. Supply and Demand
Demand INCREASES
Price
of
___
Quantity of _________
Supply*
Demand*
100
$1.00
150
Qd=Qs
$2.00
$.50
50 75 225
Demand 1
Qs-100 Qd=150
Current suppliers (producers) are
INCREASING production (Quantity
Supplied) in response to the higher
price they are receiving (The Law of
$1.20 Supply)
115 135
21. Supply and Demand
Demand INCREASES
Price
of
___
Quantity of _________
Supply*
Demand*
100
$1.00
150
Qd=Qs
$2.00
$.50
50 75 225
Demand 1
Qs-100 Qd=150
At a Price of $1.40 (roughly) Qd = Qs at
120 Units.
$1.20 The market is back in Equilibrium.
115 135
$1.40
120
22. Supply and Demand
Demand INCREASES
Price
of
___
Quantity of _________
Supply*
This is a correctly labeled Supply and
Demand graph showing an INCREASE in
DEMAND…Notice I have replaced the
numerical price and quantity with
alphabetical designations and abbreviated
the Demand and Supply Curves. This makes
this is the way I would like you to draw and
label your supply and demand graphs from
now on.
D*
Pe
D1
P1
Qe Q1
24. Supply and Demand
Demand DECREASES
Price
of
___
Quantity of _________
Supply*
Demand*
100
$1.00
ASSUMPTIONS:
1. The Demand and Supply Curves
Are rigid (they keep the same
Shape/slope)
2. The market equilibrium price is $1.00 and
the equilibrium quantity (Qd=Qs) is 100
units.
Qd=Qs
25. Supply and Demand
Demand DECREASES
Price
of
___
Quantity of _________
Supply*
Demand*
100
$1.00
NOW: Something in this
Market causes DEMAND
To DECREASE by 50%.
Qd=Qs
26. Supply and Demand
Demand DECREASES
Price
of
___
Quantity of _________
Supply*
100
$1.00
This means that at EVERY GIVEN
PRICE the Quantity Demanded is
Going to be 50% LESS.
Qd=Qs
Demand*
27. Supply and Demand
Demand DECREASES
Price
of
___
Quantity of _________
Supply*
100
$1.00
150
Qd=Qs
This means that at EVERY GIVEN
PRICE relative to Demand* the
Quantity Demanded is going to be
50% LESS.
$2.00
$.50
50 75 225
-50%
-50%
-50%
Demand* Demand 1
25
28. Supply and Demand
Demand INCREASES
Price
of
___
Quantity of _________
Supply*
100
$1.00
150
Qd=Qs
This means that at EVERY GIVEN
PRICE relative to Demand* the
Quantity Demanded is going to be
50% LESS.
$2.00
$.50
50 75 225
-50%
-50%
-50%
Demand* Demand 1
25
29. Supply and Demand
Demand INCREASES
Price
of
___
Quantity of _________
Supply*
100
$1.00
150
Qd=Qs
$2.00
$.50
50 75 225
-50%
-50%
-50%
Demand 1 Demand*
25
Now we have a NEW Demand Curve
Demand 1
The Demand Curve has
shifted to the LEFT
30. Supply and Demand
Demand DECREASES
Price
of
___
Demand 1 Demand*
Quantity of _________
Supply*
100
$1.00
150
Qd=Qs
$2.00
$.50
50 75 225
25
Now we have a NEW Demand Curve
Demand 1
The Demand Curve has
shifted to the LEFT
31. Supply and Demand
Demand DECREASES
Price
of
___
Demand 1 Demand*
Quantity of _________
Supply*
100
$1.00
150
Qd=Qs
$2.00
$.50
50 75 225
25
Let’s assume for the moment
that the PRICE does NOT
change in reaction to this
INCREASE in DEMAND
32. Supply and Demand
Demand DECREASES
Price
of
___
Demand 1 Demand*
Quantity of _________
Supply*
100
$1.00
150
Qd=Qs
$2.00
$.50
50 75 225
25
At a price of $1.00 the Quantity
Demanded is going to be 50 BUT at a
price of $1.00 there is still going to be
a Quantity Supplied of 100. OUR
MARKET IS IN DIS-EQUILIBRIUM!!
33. Supply and Demand
Demand DECREASES
Price
of
___
Demand 1 Demand*
Quantity of _________
Supply*
100
$1.00
150
Qs=100
$2.00
$.50
50 75 225
25
At this Price and Quantity Demanded
There is no market---The Market Demanders
are NOT going to Demand that Quantity at that
price. Quantity Supplied is GREATER than
Quantity Demanded
Notice: Quantity Demanded
Is LESS than Quantity Supplied
At this price
Qd=50
34. Supply and Demand
Demand DECREASES
Price
of
___
Demand 1 Demand*
Quantity of _________
Supply*
100
$1.00
150
Qs=100
$2.00
$.50
50 75 225
Notice: Quantity Demanded 25
Is LESS than Quantity Supplied
At this price
Qd=50
We have a SURPLUS in the Market!
SSuurprpluluss
35. Supply and Demand
Demand DECREASES
Price
of
___
Demand 1 Demand*
Quantity of _________
Supply*
100
$1.00
150
Qs=100
$2.00
$.50
50 75 225
Notice: Quantity Demanded 25
Is LESS than Quantity Supplied
At this price
Qd=50
This is where it is crucial to understand
the difference between a CHANGE in
DEMAND or Supply vs a CHANGE in
Quantity Demanded or Quantity
Supplied
36. Supply and Demand
Demand DECREASES
Price
of
___
Demand 1 Demand*
Quantity of _________
Supply*
100
$1.00
150
Qs=100
$2.00
$.50
50 75 225
Notice: Quantity Demanded 25
Is LESS than Quantity Supplied
At this price
Qd=50
With our change in DEMAND
finished we now turn the focus to
MOVEMENTS along our new
DEMAND CURVE Relative to
MOVEMENTS along our SUPPLY
CURVE…PRICE is going to dictate our
changes in Quantity Demanded AND
changes in Quantity Supplied
37. Supply and Demand
Demand DECREASES
Price
of
___
Demand 1 Demand*
Quantity of _________
Supply*
100
$1.00
150
Qs=100
$2.00
$.50
50 75 225
Notice: Quantity Demanded 25
Is LESS than Quantity Supplied
At this price
Qd=50
Because there is a SURPLUS in this
market, the pressure on the price of
the good is going to be
DOWNWARD. Let’s assume the
Price DECREASES to $.85
38. Supply and Demand
Demand DECREASES
Price
of
___
Demand 1 Demand*
Quantity of _________
Supply*
100
$1.00
150
Qs=100
$2.00
$.50
50 75 225
Notice: Quantity Demanded 25
Is LESS than Quantity Supplied
At this price
Qd=50
At $.85 the Quantity Demanded
(dictated by DEMAND 1) is 60 AND
the Quantity Supplied (Dictated by
Supply*) in 85.
$.85
60 85
39. Supply and Demand
Demand DECREASES
Price
of
___
Demand 1 Demand*
Quantity of _________
Supply*
100
$1.00
150
Qs=100
$2.00
$.50
50 75 225
Notice: Quantity Demanded 25
Is LESS than Quantity Supplied
At this price
Qd=50
$.85
60 85
We are STILL not in Market
Equilibrium…Quantity Demanded
(60 ) is LESS than Quantity Supplied
(85)…A SURPLUS STILL exists in this
market. The gap has closed some,
but we are not in Market
Equilibrium yet where Qd=Qs.
Surplus
40. Supply and Demand
Demand DECREASES
Price
of
___
Demand 1 Demand*
Quantity of _________
Supply*
100
$1.00
150
Qs=100
$2.00
$.50
50 75 225
Notice: Quantity Demanded 25
Is LESS than Quantity Supplied
At this price
Qd=50
$.85
60 85
The pressure on the price is going to
continue...Can you see where we
are heading???? The SURPLUS will
only be cleared when we reach the
intersection of Demand and
Supply!!
41. Supply and Demand
Demand DECREASES
Price
of
___
Demand 1 Demand*
Quantity of _________
Supply*
100
$1.00
150
Qs=100
$2.00
$.50
50 75 225
Notice: Quantity Demanded 25
Is LESS than Quantity Supplied
At this price
Qd=50
$.85
60 85
As the price decreases Demanders
are increasing their Quantity
Demanded because as the price
Decreases the quantity demanded
Increases (Law of Demand).
42. Supply and Demand
Demand DECREASES
Price
of
___
Demand 1 Demand*
Quantity of _________
Supply*
100
$1.00
150
Qs=100
$2.00
$.50
50 75 225
Notice: Quantity Demanded 25
Is LESS than Quantity Supplied
At this price
Qd=50
$.85
60 85
Current suppliers (producers) are
DECREASING production (Quantity
Supplied) in response to the LOWER
price they are receiving (The Law of
Supply)
43. Supply and Demand
Demand DECREASES
Price
of
___
Demand 1 Demand*
Quantity of _________
Supply*
100
$1.00
150
Qs=100
$2.00
$.50
50 75 225
Notice: Quantity Demanded 25
Is LESS than Quantity Supplied
At this price
Qd=50
$.85
60 85
At a Price of $.60 (roughly) Qd = Qs at
75 Units.
The market is back in Equilibrium.
$.60
44. Supply and Demand
Demand DECREASES
Price
of
___
Quantity of _________
S*
Pe
Q1
D 1 D*
P1
This is a correctly labeled Supply and
Demand graph showing an DECREASE in
DEMAND…Notice I have replaced the
numerical price and quantity with
alphabetical designations and abbreviated
the Demand and Supply Curves. This is the
way I would like you to draw and label your
supply and demand graphs from now on.
Qe