MANAGERIAL ECONOMICS 11th Edition

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Presentation transcript:

MANAGERIAL ECONOMICS 11th Edition By Mark Hirschey

Demand and Supply Chapter 3

Chapter 3 OVERVIEW Basis for Demand Market Demand Function Demand Curve Basis For Supply Market Supply Function Supply Curve Market Equilibrium

Chapter 3 KEY CONCEPTS demand direct demand utility derived demand demand function demand curve change in the quantity demanded shift in demand Supply supply function supply curve change in the quantity supplied shift in supply equilibrium market equilibrium price surplus shortage comparative statics analysis

Basis for Demand Direct Demand Derived Demand Demand is the quantity customers are willing to buy under current market conditions. Direct demand is demand for consumption. Derived Demand Derived demand is input demand. Firms demand inputs that can be profitably employed.

Market Demand Function Determinants of Demand Demand is determined by price, prices of other goods, income, and so on. Industry Demand Versus Firm Demand Industry demand is subject to general economic conditions. Firm demand is determined by economic conditions and competition.

Demand Curve Demand Curve Determination The price-quantity demanded relation. All non-price variables are held constant.

Relation Between the Demand Curve and Demand Function Move along demand curve when price changes. Shift to another demand curve when non-price variables change.

Basis For Supply How Output Prices Affect Supply Firms offer supply to make profits. Higher prices boost the quantity supplied. Lower prices cut the quantity supplied. Other Factors That Influence Supply Everything that affects marginal production costs affects supply. If MC falls, supply rises. If MC rises, supply falls.

Market Supply Function Determinants of Supply Supply is determined by price, prices of other goods, technology, and so on. Industry Supply Versus Firm Supply Firm supply is determined by economic conditions and competition. Industry supply is the horizontal sum of firm supply.

Supply Curve Supply Curve Determination The price-quantity supplied relation. All non-price variables are held constant.

Relation Between Supply Curve and Supply Function Move along supply curve when price changes. Shift to another curve when non-price variables change.

Market Equilibrium Surplus and Shortage Surplus is excess supply. Shortage is excess demand.

Comparative Statics: Changing Demand Equilibrium changes with demand shifts. Comparative Statics: Changing Supply Equilibrium changes with supply shifts. Comparative Statics: Changing Demand and Supply

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