To be used with the supply and demand guideSupply and Demand G.docx

To be used with the supply and demand guide
Supply and Demand Graphs
1
Review of x and Y axis
A graph consists of two axes called the x (horizontal/quantity)
and y (vertical/price) axes.
The point where the two axes intersect is called the origin. The
origin is also identified as the point (0, 0).
X axis
Moving right from the origin of (0,0), the numbers ascend.

Moving left from the origin, the numbers descend.
Y axis
Moving up from the origin of (0,0), the numbers ascend.
Moving down from the origin, the numbers descend.
In this course, we will mainly be using the upper right quadrant
of the graphic area.
In economics it is the norm to show the independent variable on
the y-axis and the dependent variable on the x-axis.
2
The Demand Curve
Demand Curve - A downward sloping curve that measures the
relationship between the price of a good and the quantity
demanded by consumers.
Demand - The amount that consumers are willing and able to
purchase at various prices.
Change in Demand – A shift in the position of the demand curve
that occurs in response to a change in one or more of the
determinants of demand (non-price induced change).

Law of Demand – All other factors equal, the higher the price of
the good or service, the lower the quantity demanded (price
induced change). And the lower the price, the higher the
quantity demanded. Price and Quantity Demanded vary
inversely.
Change in Quantity Demanded – A change in the quantity
consumers are willing and able to purchase. It is a response to
a change in the market price.
3
Why does the demand curve shift?
The Determinants of demand
Shifts in the curve (change in demand) result from changes in
one or more of the non-price determinants of demand:
Number of Consumers in the market (Size of Market)
Consumer Tastes and Preferences
Consumer Income
Prices of Related Goods (Substitute Goods and Complimentary
Goods)
Expectations about the Future

4
The Demand Curve: Increases In Demand
Increase in Demand
Curve shifts to the right as a result of an increase in demand by
the consumers (D1 to D2). This is caused by a change in one or
more of the determinants of demand.
This causes Price to increase (P1 to P2). This shows a
willingness to pay a higher price for all possible quantities of
the good.
Suppliers respond to the higher price by increasing Quantity
Supplied (q1 to q2) .
This process results in a new Equilibrium at e2 with
Equilibrium Price P2 and Equilibrium Quantity q2.

5
The Demand Curve: Decreases In Demand
Decrease in Demand
Demand curve shifts to the left as a result of a decrease in
demand by the consumers (D1 to D2). This is caused by a
change in one or more of the determinants of demand.
This causes Price to decrease (P1 to P2). This shows a
decreased willingness to pay for all possible quantities of the
good.
Suppliers respond to the lower price by decreasing Quantity
Supplied (q1 to q2) .
This results in a new Equilibrium at e2 with Equilibrium Price
P2 and Equilibrium Quantity q2.

6
Supply Curve
Supply Curve - A curve that normally slopes upward (to the
right) representing the quantity of a product producers are
willing and able to bring to market at various prices.
Supply – The amount that producers are willing and able to
bring to market at various prices.
Change in Supply – A shift in the position of the supply curve
in response to a change in one or more of the determinants of
supply (non-price induced change).
Law of Supply – All other factors equal, the higher the price of
a good or service, the greater the quantity supplied to the
market (price induced change). And the lower the price, the
lower the quantity supplied. Price and Quantity Supplied vary
directly.
Change in Quantity Supplied – A change in the quantity
producers are willing and able to bring to market. It is a
response to a change in the market price.

7
Why does the supply curve shift?
The determinants of supply
Shifts in the curve can be attributed to changes in one or more
of the non-price determinants of supply:
Costs of Production:
Input prices (prices of the Factors of Production - resources)
Taxes
Regulatory compliance costs
Legal Expenses
Transactions Costs
Number of Firms in the Industry (productive capacity)
Relative Prices of Alternative Outputs
Technology (sometimes this is grouped with costs of production
as technology determines the methods of production available to
the firm)
Expectations about the Future
8
The Supply Curve: Increases In Supply
Increase in Supply

Supply curve shifts to the right as a result of increased supply
in the market. (S1 to S2). This is caused by a change in one or
more of the determinants of supply.
This causes Equilibrium Price to decrease (P1 to P2).
In response to the lower price, Quantity Demanded increases
(q1 to q2).
This produces a new Equilibrium e2 at Equilibrium Price P2
and Equilibrium Quantity q2.
9
The Supply Curve: Decreases In Supply
Decrease in Supply
Supply curve shifts to the left as a result of decreased supply in
the market. (S1 to S2). This is caused by a change in one or
more of the determinants of supply.
This causes Equilibrium Price to increase (P1 to P2).
In response to the higher price, Quantity Demanded decreases
(q1 to q2).
This produces a new Equilibrium at e2 and Equilibrium Price P2
and Equilibrium Quantity q2.

10
Steps to solve supply and demand problems
Use the following steps – in the order provided – to solve
supply and demand problems.
Remember that changes occur for a reason and it is important to
follow that chain of causation in all economic analysis.
The Steps:
Identify the determinant change indicated in the problem;
Shift the curve whose determinant has changed;
Shift it in the direction indicated by the determinant change;
Change the market price in line with the curve shift;
Move along the other curve in response to the price change
(change in quantity demanded or quantity supplied as
appropriate);
Find the new market equilibrium price and quantity.

11
An example:
The Fresh Fruit Market
Start with the Fresh Fruit market in equilibrium as shown in the
graph.
At equilibrium point e, the amount that consumers wish to buy
at price P is exactly equal to the amount that producers wish to
sell at price P.
The quantity demanded is equal to the quantity supplied at the
market price of P (quantity demanded = quantity supplied).
The market clears – there is no shortage and no surplus.
Then consumers decide to eat healthier foods, including more
fresh fruit.
The determinant that changes is Consumer Tastes and
Preferences.

12
An example:
The Fresh Fruit Market – Step 2
Since consumers have now decided to consumer (buy) more
fresh fruit, the demand curve shifts to the right.
This shift graphically shows that consumers want more fresh
fruit.
AND that they are willing and able to pay more for all
quantities of fresh fruit.
This change is shown in the graph as the shift of the demand
curve from D1 to D2.
13
An example:
In response to the higher demand, the market price increases
(P1 to P2).
This, again, shows that consumers are willing and able to pay
more of the larger quantities of fresh fruit that they now want to
buy.
The new price is shown as P2 in the graph of the Fresh Fruit

Market.
14
An example:
In response to the new higher price, producers will move along
their supply curve from P1 at e1 to P2 at e2 and bring a higher
quantity of fresh fruit to the market.
This is an increase in Quantity Supplied.
This is a reaction to the higher price in the market.
The higher price is necessary to induce the greater quantity
supply as expanding output involves increased costs of
production as more resources must be hired.
This process results in the new equilibrium point, e2, at the new
equilibrium price of P2 and new equilibrium quantity of q2.

15
Conclusion
Follow this process as outlined in the Supply and Demand
Guide and as discussed and illustrated in the previous slides.
These steps work for any determinant change for either supply
or demand.
Should a problem involve a change in a determinant of demand
and a determinant of supply, these steps still work and will lead
you to the correct solution.
In such a case, work through each determinant change
individually, then combine the two changes to produce the total
change in the market and the new market equilibrium.

D
Price
Quantity
0
S
P
q
e
P2
Running Head: Week 2 Writing Assignment
8
Running Head: Week 2 Writing Assignment

Vu Phung
Davenport University
MGMT 757
Dr. Frank Novakowski
1/21/18
Best Bicycles Problem
Best’s Bicycles manufactures three different types of bikes: the
Tiny Tike, the Adult Aero, and the Mountain Monger. Given the
information in the table, calculate the required capacity for this
year’s production. Note that the times are given for assembly
lines, so capacity calculations should be in terms of the number
of lines necessary. Assume that Best Bicycles operates three
shifts, each with 2,000 hours per year.
15
18
25

a. Determine the total setup time
b. Determine the total operating time available
c. Determine the number of assembly lines
Process time required:
Tiny bike: 14,000x8 = 1120000 minutes/year
Adult Aero: 16,000x10= 160,000 minutes/year
Mountain Monger: 19,000x12= 228,000 minutes/year
Total process time: 112,000+160,000+228,000 = 500,000
minutes/year
Setup Time:
Tiny bike: 14000/8 x50= 87500
Adult Aero: 16000/18 x80= 71111
Mountain Monger: 19000/25 x40= 30,400
Total setup time: 87500+71111+30,400= 189011
Total operating time: 3 shifts/day x 2,000hours/shift/year x 60
minutes/hour = 360,000 minutes/year.
Number of assembly lines: INT (Total process time + total setup
time)/ (Total operating time) +1
=INT (500,000 +189011/ 240,000 + 1
=INT (3.87) +1 = 4.87
= 5
Correct answer is 1.8 – rounded up to 2.

Stage Gate Process
The stage gate process is a way of managing project especially
in product development and innovation which different stages
are used. These stages are referred to as gates. The gates are
manned by a manager or a steering committee and the decision
for which direction is to be taken is made through assessing
forecasts, risk analysis and an evaluation of the availability of
necessary resources (Eppinger & Ulrich, 2015). The stage gate
process is made up of five main processes that include scoping,
build business case, development, testing and validation as well
as launching. However, there is a preliminary phase known as
the ideation phase and after the fifth phase there is the post
launch review. The number of phases are often dependent on
the nature of the project of product to be designed. The gates or
stages are areas where the project is assessed with regard to
three pertinent issues. The first one is the quality of execution
where the preceding step is analyzed for its execution. It also
evaluates business rationale of pursuing the project further. It
also reevaluates the proposed action plan and whether the
requested resources still remain reasonable and sound. All the
gates have three common features that include inputs which are
the elements brought in by the project manager and the team
towards the decision point. The criteria which are the metrics
for which a project is measured against and the outputs which
are the overall results and decisions accompanying the project.
Phase 0 deals the deciding of what the company wants to pursue
and it may be conducted through a brain storming session with
the relevant stakeholders. The next step is scoping in which the
product and the market is researched in order to assess their
feasibility. Also it may require an assessment of the competition
and the available opportunities. In phase 2, the company builds
the business case and the plan for developing and launching the
product. This phase is quite complex since it requires a lot of
input from the project team and managers before the product
development. First, there is need for product definition and
analysis, then there is building the business case, building the

project plan and lastly doing a feasibility review. The third
phase is the development phase there the plans from phase 2 are
executed and the development of marketing and production
plans are initiated. Phase 4 deals with testing and validation of
the entire project through near testing, field testing and market
testing. Phase 5 deals with the product launch from the
previous phases. This includes setting up the marketing
strategy, determining volume production, organization of the
sales of the product and the setting of a product price and lastly
deciding on the distribution of the product. KFC launched its
double down burger in 2010. The product was a new offering on
the menu offering chicken fillets as a patty. The company had to
conduct sufficient market research as well as the marketing
strategy which has been thus far successful in all the countries
it has been launched. The project idea came from the meaty feel
that people look for in burgers and often get a feel of the bun.
Also the company increased awareness of the product by first
advertising that it was offered on a limited basis but it
continues to be offered (Du & & Bstieler, 2016). Comment by
Frank Novakowski: Is it always a project? Comment by
Frank Novakowski: The end of the stage is a gate where a
go/no-go decision is made. Comment by Frank Novakowski:
Source for this information needed Comment by Frank
Novakowski: Add a comma Comment by Frank Novakowski:
Add a comma
Product and Service Process Matrixes
Product Process Matrix
The product process matrix is used in analyzing the relationship
between the product life cycle and the technological life cycle.
It is used to examine the similarity in the market manufacturing
process as well as provide comprehension of the strategic
options which are available to a company. The matrix is divided
in to two main dimensions that include the product structure or
the product life cycle and the process structure or the process

life cycle. The production process uses a number of stages that
starts with a more flexible but high cost process and eventually
the process becomes standardized, mechanized and automated.
In the matrix, the company is defined as being in a certain place
on the margin which is determined by the product life cycle and
the production process selected by the company. On the far left
upper quadrant, the firms present are seen as process oriented or
focused while on the lower right quadrant, the firms are seen to
be product focused. The position of a firm in the matrix is
determined by the organization of the production system in
terms of grouping resources either around the process or the
product. The project choices include project where the product
is a onetime large scale product which are customer specific and
too large to be moved. Job shop where the company produces a
number of unique products individual in nature and require an
understanding of customer design and specifications. Next,
there is the batch processes which firm provide similar items on
a repeat basis. Then there is line production which occurs when
the product demand is high enough and the means of production
used is through an assembly line (Guisado-González & Guisado-
Tato, 2017). Comment by Frank Novakowski: Word choice?
Meaning?
Here showing the matrix would have been helpful and support
your description so the reader would not have to visualize it
through your words.
Service Process Matrix
The service process matrix considers the classification of the
service industry firms based on the nature of the individual firm
service processes. The firms are classified according to the
degrees of labor intensity and the degree of customer interaction
and customization. The company which service product that has
a considerable amount of time and the effort. In the case of
customer interaction leads to a high or low demand of aspects of
the service. The company ensures that there is customization
which alters the service in order to meet customer needs. In the
upper left quadrant, service factory, it accommodates firms with

low degrees of labor intensity and low levels of interaction and
customization. These firms can take advantage of the economies
of scale. The upper right quadrant, service shop, accommodates
firms with a low degree of labor intensity but a high degree of
interaction and customization. The lower left quadrant deals
with mass service which are firms with a high degree of labor
intensity and low levels of interaction and customization. They
include retail firms and schools. And the lower right quadrant
deals with firms which have a high labor intensity and high
degree of customization. It includes professional service
provided by accountants, doctors and lawyers. Comment by
Frank Novakowski: References you used to provide this
information needed to be cited.
For the most part these two matrixes are similar in their nature
and the level of intensity with which the product or services are
represented in the matrix. The main difference is in the
representation of the product or process life cycle and the
nature of service provided to the customer. They are however
useful tools in providing a visual on how companies grow
throughout their product delivery process (Goetsch & Davis,
2014).
Discussion of comparison and contrasts was too brief and
superficial. – 2 points
References
Du, S., Yalcinkaya, G., & Bstieler, L. (2016). Sustainability,
social media driven open innovation, and new product
development performance. Journal of Product Innovation
Management, 33(S1), 55-71.
Eppinger, S., & Ulrich, K. (2015). Product design and
development. McGraw-Hill Higher Education.
Goetsch, D. L., & Davis, S. B. (2014). Quality management for

organizational excellence. Upper Saddle River, NJ: pearson.
Guisado-González, M., Wright, L. T., & Guisado-Tato, M.
(2017). Product–process matrix and complementarity
approach. The Journal of Technology Transfer, 42(3), 441-459.
1. Find one or two news articles from the Internet that illustrate
a shift in supply and/or demand. The article(s) need to illustrate
at least two of the four graphs. This may require two articles.
The article(s) must be recent (within the last six months), and
MUST NOT be from an encyclopedia or reference website that
discusses demand and supply.
2. DO NOT use blogs.
3. The best articles are about changes in the price and/or sales
of a particular product. Or about the changes in the costs of
production or of inputs that impact the supply curve.
You then have the opportunity to demonstrate your
understanding of supply and demand shifts as you explain the
changes in price and quantity experienced by the product you
choose. RECOMMENDATION: READ THE SAMPLE
PROJECT:Under the Start Here link.
4. Summarize the article(s). (Do not quote the article(s), but
explain it as if you were telling someone about it. If you do use
a direct quote or paraphrase, remember
that citationsandreferences are required.) If you use more than
one article, then citations are required.
5. Explain which graph in our collection - A, B, C, or D -
illustrates the shift that you identify by describing the change in
price and the change in equilibrium quantity. Remember to
illustrate the shifts shown in at least two of the four graphs.
6. Do use paragraphs in your post. And do remain focused on
what is in the article.
7. Provide a full URL link to the article(s) along with an APA-

formatted reference to the article(s) at the bottom of your
submission.
8. Important: This is a Microeconomic course. Do not choose an
article discussing Macroeconomic issues: Inflation,
unemployment, trade deficit, government budget deficit, etc.
To receive full credit, your submission must be at least at least
750 words long, excluding the reference and the article link
information.

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