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Applications and Extensions of Supply and Demand Analysis

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Presentation on theme: "Applications and Extensions of Supply and Demand Analysis"— Presentation transcript:

1 Applications and Extensions of Supply and Demand Analysis
3 C H A P T E R WEB Applications and Extensions of Supply and Demand Analysis

2 Changes in Supply & Demand
Single Changes Complex Changes Agricultural Products Lettuce – Oranges – Cherries Damage from Weather Example: Freeze of Lettuce Crops Graphically…

3 Lettuce Supply & Demand
Crop Freezing Damage… P S2 S1 P2 Price (per pound) P1 D1 o Q2 Q1 Q Quantity

4 American Flags Patriotism Surge… P S1 D2 D1 o Q P2 Price (per flag) P1
Quantity

5 Pink Salmon Increase in Supply & Decrease in Demand P S1 S2 D1 D2 o Q
Price (per fish) P2 D1 D2 o Q1 Q2 Q Quantity

6 Gasoline Decrease in Supply & Increase in Demand P S2 S1 D2 D1 o Q P2
Price (per gallon) P1 D2 D1 o Q1 Q2 Q Quantity

7 Sushi Increase in Demand & Increase in Supply P S1 S2 D2 D1 o Q
Price (per pound) P1 D2 D1 o Q1 Q2 Q Quantity

8 Preset Prices Olympic Figure Skating Finals Tickets P S Equilibrium
Price (per ticket) Predetermined Price P1 Shortage D o Q1 Q2 Q Quantity

9 Preset Prices Olympic Curling Preliminaries Tickets P S Predetermined
Surplus P1 Price (per ticket) Equilibrium Price P2 D o Q2 Q1 Q Quantity

10 Nonpriced Goods The American Bison Before the Railroad No Price Is
Price (per bison) No Price Is Determined & No Market Exists! Surplus o Q1 Q2 Q Quantity

11 Nonpriced Goods The American Bison After the Railroad Price of 0
Led to Excess Demand and Shortages Occurred Price (per bison) Shortage o Q3 Q4 Q Quantity

12 Transaction Surpluses
Consumer Surplus - Oranges P Consumer Surplus Equilibrium Price = $8 Price (per bag) P1 D o Q1 Q Quantity (bags)

13 Transaction Surpluses
Producer Surplus - Oranges P S Producer Surplus Equilibrium Price = $8 Price (per bag) P1 o Q1 Q Quantity (bags)

14 Transaction Surpluses
Maximum Combined Surpluses P S Consumer Surplus Price (per bag) P1 Producer Surplus D o Q1 Q Quantity (bags)

15 Transaction Surpluses
Efficiency Losses P Quantity Below the Equilibrium S Quantity Above the Equilibrium Price (per bag) D o Q2 Q1 Q3 Q Quantity (bags)

16 Transaction Surpluses
Efficiency Losses P Quantity Below the Equilibrium S Quantity Above the Equilibrium Price (per bag) D o Q2 Q1 Q3 Q Quantity (bags)

17 nonpriced goods consumer surplus producer surplus efficiency losses
Key Terms nonpriced goods consumer surplus producer surplus efficiency losses Copyright McGraw-Hill/Irwin, 2005 BACK END

18 Next: The Market System Chapter 4

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