Copyright 2006 – Biz/ed The Market System Demand, Supply and Price Determination.

Slides:



Advertisements
Similar presentations
What is a Market? A market is the interaction of buyers and sellers for the purpose of making an exchange, which establishes a price for the goods or.
Advertisements

3 CHAPTER Demand and Supply.
Demand, Supply and Price Determination
Demand And Supply Demand
The Market Structure.  Markets are any place where transactions take place.  It is an arrangement between buyers and sellers in order to exchange. 
The Market Forces of Supply and Demand
MARKETS AND COMPETITION
2 SUPPLY AND DEMAND I: HOW MARKETS WORK. Copyright © 2004 South-Western 4 The Market Forces of Supply and Demand.
SUPPLY AND DEMAND I: HOW MARKETS WORK. Copyright © 2004 South-Western The Market Forces of Supply and Demand.
SUPPLY AND DEMAND: HOW MARKETS WORK
Chapter 4 Demand, Supply, and Markets © 2009 South-Western/Cengage Learning.
Copyright © 2004 South-Western SUPPLY Quantity supplied is the amount of a good that sellers are willing and able to sell. Law of Supply The law of supply.
Demand. Quantity of a product that buyers are willing and able to purchase at any and all prices Consumers are interested in receiving the most satisfaction.
3 Demand and Supply Notes and teaching tips: 4, 6, 41, and 46.
Demand and Supply: Basics September 9, Demand  In a market economy, the price of a good is determined by the interaction of demand and supply.
“Supply, Demand, and Market Equilibrium”
Practice  Using the following demand schedule, graph the demand curve that represents the following data. Include: A title Label your axes (include units)
Chapter 3 Supply and Demand: In Introduction. Basic Economic Questions to Answer What: variety and quantity How: technology For whom: distribution.
Supply and Demand 4 Teach a parrot the terms supply and demand and you’ve got an economist. — Thomas Carlyle CHAPTER 4 Copyright © 2010 by the McGraw-Hill.
DEMAND AND SUPPLY Chapter 4. Today’s lecture Demand The Law of Demand The Demand Curve Shifts in Demand Curve versus Movement along a Demand Curve Individual.
The Market System Demand, Supply and Price Determination.
The Allocation Of Resources In Competitive Markets
1 Demand, Supply & Equilibrium Demand & its Determinants  Wants Vs. Demand  A general example: The demand for Soda  Demand Schedule & Demand Curve 
Chapter 4 Demand and Supply. The Market can be a location, network of buyers and sellers for a product, demand for a product or a price-determination.
TO BE USED WITH THE SUPPLY AND DEMAND GUIDE Supply and Demand Graphs.
Copyright © 2004 South-Western Unit #2 Supply and Demand Supply and demand are the two words that economists use most often. S/D are the forces that make.
Learning Objectives This chapter introduces the notions of supply and demand and shows how they operate in competitive markets for individual commodities.
Copyright 2003 – Biz/ed The Market System Demand, Supply and Price Determination.
1 Demand and Supply Analysis CHAPTER 4 © 2003 South-Western/Thomson Learning.
3 DEMAND AND SUPPLY.
Supply & Demand. Before We Start Economic Terms: Market Competitive Market Perfectly Competitive Normal Good Inferior Good Substitutes Complements Ceteris.
 where the supply and demand curves meet  equilibrium price: P where Q D = Q S  equilibrium quantity: Q where Q D = Q S.
Price Supply and Demand. 4 P’s…Prices in a Free Market Some companies have no control over the prices they can sell their good for if one product is the.
Demand and Supply. Starter Key Terms Demand Demand Schedule Demand Curve Law of Demand Market Demand Utility Marginal Utility Substitute Complement Demand.
10/15/ Demand, Supply, and Market Equilibrium Chapter 3.
Chapter 3: Individual Markets: Demand & Supply
PowerPoint Slides prepared by: Andreea CHIRITESCU Eastern Illinois University The Market Forces of Supply and Demand 1 © 2011 Cengage Learning. All Rights.
The Market Forces of Supply and Demand. Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. The Market Forces of Supply and Demand.
Chapter The Market Forces of Supply and Demand 4.
Copyright © 2008 Pearson Addison-Wesley. All rights reserved. Chapter 3 Demand, Supply, and Price.
Demand and Supply Analysis Trudie Murray © Demand The amount consumers desire to purchase at various prices Demand does not necessarily mean a consumer.
© 2010 Pearson Education Canada. Markets and Prices A market is any arrangement that enables buyers and sellers to get information and do business with.
3 DEMAND AND SUPPLY © 2014 Pearson Addison-Wesley After studying this chapter, you will be able to:  Describe a competitive market and think about a.
Demand and Supply Chapter 3. Demand demand is a schedule that shows the various amounts of a product consumers are WILLING and ABLE to BUY at each specific.
2 SUPPLY AND DEMAND I: HOW MARKETS WORK. Copyright © 2004 South-Western 4 The Market Forces of Supply and Demand.
3 CHAPTER Demand and Supply © Pearson Education 2012 After studying this chapter you will be able to:  Describe a competitive market and think about.
PART 2 SUPPLY AND DEMAND I: HOW MARKETS WORK. Copyright © 2006 Nelson, a division of Thomson Canada Ltd. 4 The Market Forces of Supply and Demand.
Demand and Supply Krugman Section Modules 5-7. Demand demand is a schedule that shows the various amounts of a product consumers are WILLING and ABLE.
Supply and Demand. The Law of Demand The law of demand holds that other things equal, as the price of a good or service rises, its quantity demanded falls.
SUPPLY & DEMAND. Demand  Demand is the combination of desire, willingness and ability to buy a product. It is how much consumers are willing to purchase.
PPT accompaniment for the Consortium's Supply, Demand, and Market Equilibrium.
Demand.  Demand can be defined as the quantity of a particular good or service that consumers are willing and able to purchase at any given time.
Introduction: Thinking Like an Economist 1 CHAPTER Supply and Demand Teach a parrot the terms supply and demand and you’ve got an economist. — Thomas Carlyle.
“Supply, Demand, and Market Equilibrium”. Demand Review 1. What is Demand? 2. Give an example of substitute goods 3. Give an example of complementary.
MICROECONOMICS Chapter 3 Demand and Supply
Econ 2301 Dr. Jacobson Mr. Stuckey Week 3 Class 3.
Copyright © 2010 Pearson Education Canada. What makes the prices of oil and gasoline double in just one year? Will the price of gasoline keep on rising?
Demand Demand is a schedule or curve that shows the various amounts of a product that consumers will buy at each of a series of possible prices during.
The Market System Demand, Supply and Price Determination.
Copyright 2004 – Biz/ed The Market Mechanism VCE Business.
Supply and Demand A competitive market is a market in which there are   many buyers and sellers   of the same good or service. The supply and demand.
Demand and Supply Chapters 4, 5 and 6. Demand demand is a schedule that shows the various amounts of a product consumers are WILLING and ABLE to BUY at.
Intro To Microeconomics.  Cost is the money spent for the inputs used (e.g., labor, raw materials, transportation, energy) in producing a good or service.
What is the Law of Supply? MODULE 6 SUPPLY AND EQUILIBRIUM.
SUPPLY AND DEMAND I: HOW MARKETS WORK
SUPPLY AND DEMAND TOGETHER
Pricing.
Market Mechanism : Supply And Demand
Chapter 4 Demand and Supply.
“Supply, Demand, and Market Equilibrium”
Presentation transcript:

Copyright 2006 – Biz/ed The Market System Demand, Supply and Price Determination

Copyright 2006 – Biz/ed The Market System Market consists of: –Consumers - create a demand for a product Demand –the amount consumers desire to purchase at various prices –Not what they will buy, but what they would like to buy! Effective demand – must be willing AND able to pay

Copyright 2006 – Biz/ed Individual and Market Demand Market demand – consists of the sum of all individual demand schedules in the market Represented by a demand curve At higher prices, consumers generally willing to purchase less than at lower prices Demand curve – negative slope, downward sloping from left to right

Copyright 2006 – Biz/ed The Demand Curve Price (£) Quantity Demanded (000s) Demand £10 £ The demand curve slopes downwards from left to right (a negative slope) indicating an inverse relationship between price and the quantity demanded. Demand will be higher at lower prices than at higher prices. As price falls, demand rises. As price rises, demand falls.

Copyright 2006 – Biz/ed The Demand Curve 2 The level of demand – –determines where on the graph it sits Low demand – –nearer the origin High demand – –further from the origin (assuming same scale) Dependent on a variety of factors Demand curve moves in response to changing factors

Copyright 2006 – Biz/ed The Demand Curve 3 Factors influencing demand D = f (P n, P n …P n-1, Y, T, P, A, E) Where: P n = Price P n …P n-1 = Prices of other goods – substitutes and complements Y = Incomes – the level and distribution of income T = Tastes and fashions P = The level and structure of the population A = Advertising E = Expectations of consumers

Copyright 2006 – Biz/ed The Demand Curve 4 Changes in any of the factors other than price causes the demand curve to shift either: Left (Less demanded at each price) or Right (More demanded at each price)

Copyright 2006 – Biz/ed The Demand Curve 5 Price (£) Quantity Demanded (000s) Demand £ D1 D Changes in any of the factors affecting demand other than price cause the entire demand curve to shift to the left (less demanded at each price) or to the right (more demanded at each price).

Copyright 2006 – Biz/ed The Supply Curve Supply refers to the amount of a certain good producers are willing to supply when receiving a certain price The relationship between price and how much of a good or service is supplied to the market is known as the supply relationship

Copyright 2006 – Biz/ed The Supply Curve Factors influencing supply: S = f (P n, P n..P n-1,H, N,F 1..F m,E,Sp) Where: Pn = Price P n..P n-1 = Profitability of other goods in production and prices of goods in joint supply H = Technology N = Natural shocks (Examples of supply shocks include unusually bad (good) weather which reduces (increases) the supply of a commodity such as wheat) F 1..F m = Costs of production E = Expectations of producers Sp = Social factors

Copyright 2006 – Biz/ed The Supply Curve Changes in any of the factors OTHER than price cause a shift in the supply curve A shift in supply to the left – the amount producers offer for sale at every price will be less A shift in supply to the right – the amount producers wish to sell at every price increases HINT: Be careful to not confuse supply going ‘up’ and ‘down’ with the direction of the shift!

Copyright 2006 – Biz/ed The Supply Curve Price £ Quantity Bought and Sold (000s) Supply £3 200 £7 800 The supply curve slopes upwards from left to right indicating a positive relationship between supply and price. As price rises, it encourages producers to offer more for sale whereas a fall in price would lead to the quantity supplied to fall.

Copyright 2006 – Biz/ed The Supply Curve Price £ Quantity Bought and Sold (000s) Supply £4 400 S1 100 S2 900 Changes in any of the factors affecting supply other than price will cause the entire supply curve to shift. A shift to the left results in a lower supply at each price; a shift to the right indicates a greater supply at each price.

Copyright 2006 – Biz/ed The Market Price (£) Quantity Bought and Sold (000s) S D £5 600 D1 300 Surplus £3 450 A shift in the demand curve to the left will reduce the demand to 300 from 500 at a price of £5. Suppliers do not have the information or time to adjust supply immediately and still offer 600 for sale at £5. This results in a market surplus (S > D) In an attempt to get rid of surplus stock, producers will accept lower prices. Lower prices in turn attract some consumers to buy. The process continues until the surplus disappears and equilibrium is once again reached.

Copyright 2006 – Biz/ed The Market Price (£) Quantity Bought and Sold (000s) S D £5 600 S1 100 Shortage £8 350 A shift in the supply curve to the left would lead to less products being available for sale at every price. Suppliers would only be able to offer 100 units for sale at a price of £5 but consumers still desire to purchase 600. This creates a market shortage. (S < D) The shortage in the market would drive up prices as some consumers are prepared to pay more. The price will continue to rise until the shortage has been competed away and a new equilibrium position has been reached.