Microeconomics - Chapter 2: Basic Analysis of Supply and Demand

Market

where buyers and sellers can meet to facilitate the exchange or transaction of goods and services.

Market transaction

include goods, services, information, currency, or any combination that passes from one party to another.

Market demand

is the total quantity demanded by all consumers in for a given good.

Aggregate demand

is the total demand for all goods and services in an economy.

The law of demand

concerns consumers' changing desire to purchase goods and services at give given prices.

Demand

is an economic concept that relates to a consumer's desire to purchase goods and services and willingness to pay a specific price for them.

Demand analysis

is the research conducted by companies that aim at understanding customer demand for a certain product.

Evaluating Customers' Response Towards a Product

Gaining and monitoring customer feedback is vital if your goal is to see customers' reactions to your new new product.

Formulating a Pricing Policy

You can set the prices after having analyzed the demand thoroughly.

Sales Forecasting

It enables you to make informed business decisions and predict your company's performance.

Establishing a Production Policy

It enables you to define the gap between demand and supply.

Quantity demanded

refers to the total amount of a good or service that consumers demand over a given period.

Change in quantity demanded

refers to a movement along the demand curve, which is caused only by a chance in price.

Change in demand

refers to a shift in the entire demand curve, which is caused by a variety of factors (preferences, income, price of substitutes and caused by a variety complements, expectations, population, etc.).

Demand curve

or a supply curve is a relationship between two, and only two, variables: quantity on the horizontal axis and price on the vertical axis.

Supply

is the basic economic concept that describes the total amount of a specific good provided to the market for consumption.

Supply analysis

provides a logical approach to evaluate several elements in the market.

Methods of Supply Analysis

Market structure

Competition

Supply chains

Substitute goods and services

Agency’s value as a customer or so - called supplier referencing

Supply curve

the commodity indicates the supply of the commodity.

Change in quantity supplied

is defined as the change in the level of the quantity that the seller wishes to sell at a particular price, occurring due to a change in the price of the commodity (other factors remaining constant)

Change in supply

is defined as the change in the level of the quantity that the seller wishes to sell at a particular price, occurring due to changes in other factors of the supply (own price of the commodity remains the same)

Expansion of Supply

(An Upward Movement) rise in own price of the commodity, by keeping other factors constant.

Contraction of Supply

(A Downward Movement) a fall in the respective price by keeping other factors constant.

Increase in Supply

An increase in the supply of a commodity due to factors other than the own price of commodity.

Decrease in Supply

A decrease in the supply of a commodity due to factors other than the own price of of the commodity.

Market Disequilibrium

shortage will exist at any price below equilibrium, which leads to the price of the good increasing.

Price floors

are the minimum prices set for goods and services. They may be set by the government or, in some cases, by producers themselves.

Price ceilings

or caps are the highest points at which goods and services can be sold. This occurs when authorities want to help consumers if they feel that prices are far too high.