Reasons for price fluctuations of avocados can be attributed to various factors such as supply and demand dynamics, seasonal production, and global market trends.
Distinguish between Quantity Demanded and Demand, and identify determinants of demand.
Differentiate between Quantity Supplied and Supply, and recognize factors affecting supply.
Explain how demand and supply interact to determine market price and quantity, alongside effects of demand and supply changes.
A market is an arrangement that connects buyers and sellers, which can be in a physical location or virtual spaces.
In competitive markets, multiple buyers and sellers exist so that no single entity can influence the price.
Definition: The amount that consumers are willing and able to purchase at a specified price in a specific time frame (e.g., cups of coffee/day).
If the price of a good increases, the quantity demanded decreases (↑ → ↓).
If the price decreases, the quantity demanded increases (↓ → ↑).
Demand Schedule: A tabulation of quantities demanded at different prices.
Demand Curve: Graphical representation detailing the relationship between quantity demanded and price when other factors are constant.
Individual Demand: Quantity one consumer is willing to purchase at different prices.
Market Demand: The aggregate of all individual demands in the market, illustrated by a combined demand curve.
A change in demand indicates a shift of the demand curve and new demand schedules occur due to:
Prices of related goods
Expected future prices
Income changes
Changes in the number of buyers
Shifts in consumer preferences
When the price of a substitute rises, the demand for a related good increases (e.g., coffee and tea).
When the price of a complement falls, demand for the main good increases (e.g., coffee and sugar).
Demand increases as income increases.
Demand decreases as income increases.
Result of price changes leading to movement along the demand curve.
Results from changes in non-price factors shifting the entire demand curve.
If the price of a good increases, the quantity supplied increases (P↑ ⇒ QS↑).
If the price falls, quantity supplied decreases (P↓ ⇒ QS↓).
Relationship between quantity supplied and price, with constant external influences.
Individual Supply: Quantity one seller is willing to supply at various prices.
Market Supply: Total supply from all sellers, represented by a combined supply curve.
Factors that cause shifts in the supply curve include:
Prices of related goods (substitutes in production)
Prices of inputs/resources
Expected future prices
Number of sellers
Productivity effects (e.g., technology changes)
Change in Quantity Supplied: Movement along the supply curve due to price change.
Change in Supply: Shift of the supply curve due to changes in external factors.
Occurs when the quantity demanded equals the quantity supplied, establishing an equilibrium price and quantity.
Shortages lead to price increases, while surpluses lead to price decreases.
Analyze how events influence demand or supply.
Increased demand shifts the demand curve right, increasing equilibrium price and quantity.
Decreased demand shifts the demand curve left, resulting in lower equilibrium prices.
Increased supply shifts the supply curve right, lowering prices and increasing quantity.
Decreased supply shifts the supply curve left, raising prices and lowering quantity.
Analyze effects simultaneously to understand shifts in price and quantity with real-world examples.