1. Entrepreneurship 3209
1.2: Supply & Demand

2. Role of the Consumer We have discussed the role played by the consumer
Influence on Products
Influence on Price
Influence on Service

3. Role of the Consumer: Concepts
Producer
Consumer
Marketplace
Competition
Pricing Power
Customers
Consumer Purchasing Power

4. Demand, Supply, & Price
The amount of a good or service that consumers demand, the amount that suppliers can supply, & the price all affect one another.
This is the relationship that we will now explore.

5. Law of Demand
Demand is the quantity of a good or service that consumers are willing & able to buy at a particular place
Since each of us have different needs & wants and different levels of ability to pay for things, we each have different demands
When we buy a particular good or use a particular service, we are expressing a demand for it

6. Law of Demand
Usually, consumers buy more as price decreases (increase demand) & buy less as price increases (decrease demand)
law of demand: The economic principle that demand goes up when prices goes down; and, conversely, comes down when prices go up

7. Conditions Creating Demand
Consumer must be interested or aware of the good or service (advertising & marketing plays a role here)
Enough of it must be available
The price must be reasonable & competitive
It must be accessible to the consumer (location, location, location)

8. Factors That Can Increase or Decrease Demand
Changing Consumer Income
Changing Consumer Tastes
Changing Expectations for the Future
Changes in Population

9. 1. Changing Consumer Income
usually an increase in income means people buy more.(cars, furniture, TVs)
For some types of goods the opposite may be true
Increased income may see a decrease in grocery items because people are buying more restaurant meals

10. 2. Changing Consumer Tastes
Changes in consumer tastes over time can cause an increase in demand for fashionable items & a decrease in demand for what is perceived as unfashionable
Jean styles come in and go out of fashion regular intervals

11. 3. Changing Future Expectations
if prices or income are expected to increase consumers may purchase more now in anticipation
Upward change in expectations = increase demand
Reverse is true if the is a decrease in expectations (demand will decrease).

12. 4. Changes in Population
Population increases creates need for more houses, roads, cars, services, etc
We also find that as certain segments of the population increases certain things increase in demand.
(Seniors in Canada are creating a demand for health care, retirement homes, certain sporting activities such as golf, etc )

13. Law of Supply
If the goods & services consumers demand can be provided at prices they are willing to pay, businesses will supply them
Supply: The quantity (amount) of a good or service that producers can provide
determined by the costs of producing it and by the price people are willing to pay for it

14. Law of Supply
Law of Supply: The economic principle that supply goes up when prices goes up; and, conversely, comes down when prices come down

15. Conditions Affecting Supply
The cost of producing it
The price consumers will pay

16. Factors That Can Increase or Decrease Supply
Changes in the Number of Producers
Changes in Price
Changes in Technology
Changing Expectations for the Future
Changing Production Costs

17. 1. Changes in Number of Producers
An increase in producers will increase supply – if demand remains the same, price will drop!

18. 2. Changes in Price
If price reduces then people may stop producing it. E.g. If cod prices fall, fishermen will catch other fish

19. 3. Changes in Technology
Changes in technology can reduce the cost of production, encouraging more businesses to start producing. E.g. CPU wafers, continually getting smaller and smaller and are able to produce more per wafer

20. 4. Changing Future Expectations
Many producers attempt to predict economic conditions and consumer demand for two to five years in advance. E.g. Automobile companies
They increase or decrease supply accordingly

21. 5. Changing Production Costs
If a local baker owner finds a lower cost for ingredients, they can produce more goods for the same cost.
The opposite may be true as well, should the supplier increase costs

22. Supply, Demand and Price
Relating Price to supply and demand
If demand is high while supply is low, prices tend to be high
If demand is low while supply is high, prices tend to be low

23. Supply, Demand and Price
Relating Price to supply and demand
The equilibrium price : When the quantity of goods that a producer is willing to supply at a certain price matches the quantity of goods that consumers are willing to buy at that price

24. Supply, Demand and Price
What would you do if a good or service that you use suddenly increases in price? Think about purchases to meet both needs and wants.