Supply and Demand. What is supply? Supply and Demand ▸ Supply- quantity of a product or service that sellers are willing and able to provide the market.

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Presentation transcript:

Supply and Demand

What is supply?

Supply and Demand ▸ Supply- quantity of a product or service that sellers are willing and able to provide the market at a given price

Supply and Demand Importance of understanding supply ▸ For better understanding of changing prices ▸ Supply influences price

Supply and Demand Causes for changes in supply ▸ Changes in production costs ▸ Prices of related goods ▸ Number of sellers in the market ▸ Future expectations of price ▸ Past performances of price

Supply and Demand Law of Supply ▸ Relationship between product supply and price

Supply and Demand Supply is not just a single product at a single price!

Supply and Demand What is demand?

Supply and Demand ▸ Demand- quantity of a product or service that buyers are able and willing to purchase from the market at a single price

Supply and Demand Factors influencing demand ▸ Changes in personal income ▸ Prices of related goods ▸ Number of buyers in the market ▸ Future expectations of price ▸ Past performances of price

Supply and Demand Law of Demand ▸ Low prices = More buyers ▸ High Prices = Fewer buyers

Supply and Demand Establishing Price Through supply and demand price can be established.

Supply and Demand Equilibrium price Definition: quantity supplied equals quantity demanded

Supply and Demand Equilibrium price=market price

Supply and Demand ▸ Complementary ▸ Supplementary ▸ Elastic vs. Inelastic

Supply and Demand Complementary - Definition ▸ If an increase in the price of one product decreases the consumption of another

Supply and Demand Complementary ▸ Products that are eaten and/or promoted together ▹ Examples: ham and eggs, lettuce and salad dressing

Supply and Demand What is Supplementary?

Supply and Demand Supplementary - Definition ▸ A product that does not compete with another product

Supply and Demand Supplementary - Definition ▸ Products that do not compete with other products ▹ Examples: sheep and wheat production

Supply and Demand What is Elastic and Inelastic?

Supply and Demand Elastic - Definition ▸ Demand of a product whose use is not directed by necessity or habit, therefore has several substitutes

Supply and Demand Elastic ▸ Causes consumers to be more cautious of price changes ▹ Examples: T-bone steaks

Supply and Demand So what is Inelastic?

Supply and Demand Inelastic - Definition ▸ Products that have a necessity and very few substitutes

Supply and Demand Inelastic ▸ Consumers must have these items and are insensitive to price changes ▹ Examples: bread, milk

...and we’re done!