SUPPLY

Demand and Supply Framework

  • Concept Overview

    • Discussed the equilibrium price and quantity within the market.

    • Examined how external factors can affect market price and quantity.

Graphical Analysis of Peanut Butter Market

  • Case 1: Rise in Price of Peanuts

    • Upward pressure on peanuts affects peanut butter supply and demand.

    • Equilibrium points need to be marked on the graph.

    • Original equilibrium must be indicated.

    • Price of Peanuts Increases

    • Leads to decrease in supply of peanut butter.

    • Quantity demanded for peanut butter decreases.

    • Adjustment:

    • The supply curve shifts to the left.

    • The new equilibrium price increases, and equilibrium quantity decreases.

    • Common Misunderstandings:

    • Confusion around whether the demand curve should shift instead.

    • Correct understanding is that price increase in an input (peanuts) affects supply of the output (peanut butter).

Additional Graphical Analysis

  • Case 2: Increase in Demand for Peanut Butter

    • Demand shifts right when people perceive peanut butter as a healthier diet option.

    • New graph must reflect this shift and price increase, while quantity increase is subject to supply constraint.

  • Understanding Market Dynamics

    • If both demand increases and supply decreases:

    • Price increases while quantity impact remains uncertain without specific magnitude of shifts.

    • Factors influencing shifts:

    • More pronounced supply shift leads to quantity decrease and less pronounced demand shift can keep quantity stable.

Graphing Compliment Goods: Bagels and Cream Cheese

  • Markets in Equilibrium:

    • Each must begin in an equilibrium state for proper analysis.

  • Case Study

    • Price of flour rises: affects supply of bagels (as flour is an input).

    • Supply curve for bagels shifts left, leading to a price increase and a reduction in quantity demanded of bagels.

    • Complementary Goods:

    • As bagels become more expensive, demand for cream cheese decreases as they are typically consumed together.

    • New equilibria for both markets should be labeled clearly to avoid confusion.

Importance of Labeling in Graphs

  • Essential for clear understanding in microeconomic graphs.

    • Unlabeled graphs lead to confusion and are less useful for interpreting data.

  • Points and Marks:

    • Points will be awarded for clarity in labels even if final results are incorrect.

Real World Application: Childcare Market during COVID-19

  • Economic Impact:

    • Significant shifts in the childcare market were noted during the pandemic.

    • Availability decreased, costs increased, and reliability lapsed in many cases.

  • Statistics:

    • Approximately 30% of childcare workers exited the industry due to stress or COVID fears.

    • Partial closures of numerous centers occurred, leading to lasting impact on the market.

Assignment and Understanding Changes

  • Hypothetical Market Scenarios:

    • As students, expect to decipher such impacts through exercises involving demand and supply shifts, including adjustments to equilibrium.

  • Task Directions:

    • Review clips and answer questions about market identification based on economic principles.

    • Draw and label graphs correctly as shifts occur in supply and demand.