Demand And Supply

Supply

Shows the various AMOUNTS of a product that a SELLER is WILLING AND ABLE to SELL at a PARTICULAR PRICE during a PARTICULAR TIME

Supply Relationship/ Law of Supply

Is positive/direct. If price increases, Quantity supplies increases and vibe versa

Changes in Price for Supply

Causes movement along the supply curve, “quantity supplied’ changed, not supply.

Non-Price Factors for supply

anything thats not the good in question that affects will/ability to supply at this time, SHIFTS supply. SUPPLY changed

Increase in supply

Shift to the right

Decrease in Supply

shift to the left

Determinants of Supply

Price of Inputs/Cost of Production, Technology, # of sellers, taxes and subsidies

Price of Inputs

Supply. Land, labor, capital, enterprice but really rent, wages, interest, profits. If they go up, S to the left. Down, S to the right

Technology

Supply. Improvements, to the right, decrease, to the left

Number of Sellers

supply. More, right. Less, left

Taxes and subsidies

Supply. More taxes, left. Less taxes, right. More subsidies, right. Less subsidies, left

Market Equilibrium

Meeting point between D and S or sellers and buyers. They agree on Quantity and Price

Surplus

If price is above Eqiulibrium. There is more supply than buyers willing to buy

Shortage

A price below equilibrium. More is demanded than what is supplied

Invisible Hand

When markets are left along, the tendency is pushes towards a market eqiulibrum

How to find market Demand, and supply

QD/QS is multiplied y the number of buyers/suppliers

What to do when Demand AND Supply are affected?

Draw their graphs separately, then take the overall result.

Government Set Prices

price ceilings, price floors

Price ceiling

Government sets a max price, no one can legally go higher. IE, rent control. Creates a shortage

Price Floor

Government sets a minimum price no-one can go under. Creates a surplus. IE minimum wage and milk

Demand and Supply are used for what

To establish equilibriumm prices and quantites within a market

Market

an institution or mechanism that brings together buyers/demanders and sellers/supplies of a particular good/service or resource for the purposes of exchange (farmers market, ebay, stock)

Demand

Shows the various amounts of a product that consumers are willing and able to purchase and a particular price during a particular time

Demand relationshop/Law of Demand

Inverse/negative. As Price decreases, Quantity demanded increases and vice versa. Its about direction, not magnitute.

Why does Demand curve slope downward?

Diminishing Marginal Utility, Income effect, and substitution effect

Diminishing Marginal Utility

As you consume more and more of one good, you want less of it. To get consumers to want higher quantities, price must drop

Income Effect

As the price of a good changes, so does purchasing power. If price decreases, purchasing power increases and vice versa

Substitution Effect

As the price of a good falls, then its cheaper when compared to other goods. Its MENTAL SUBSTITUTION, you buy the same of other goods. Vice versa

Changes in price Demand

Of the good in question, today. Movement ALONG THE DEMAND CURVE. QUANTITY DEMANDED changes. If price goes up, Quantity demanded decreases and vice versa

Determinants of Demand

Tastes/Preferences, Number of buyers, Price expectations, Income Variable, Price of related goods

Increase in demand

Shifts demand to the right

Decrease in Demand

Shifts demand to the left

Tastes/Prefernces

Demand. More favorable, right. Less favorable, left

Number of buyers

Demand. More buyers, right. Less buyers, left

Price Expectations (in the future)

Demand. Expecting Prices to increase in the future, right. Decrease, left.

Income Variable

Demand. Can be “Normal” or “Inferior” goods

“Normal Goods”

Demand. We buy more as income increases like Ariana.

“Inferior Goods”

Demand. We buy less as income increases, like thriftstore

Prices of Related goods

Demand. Can be substitutes or complements

Substitutes

Demand. We use these in place of each other like Pepsi and Coke. If Price of Pepsi increases, demand for coke shifts to the right

Complements

Demand. Goods used together. PB and Jelly. If price of Jelly increases, demand for PB decreases