1. Demand and Supply Analysis

2. Demand and supply analysis The price mechanism: effect of a rise in demand the goods market The price mechanism: effect of a rise in demand the goods market

3. Goods Market DgDg  shortage (D g > S g ) PgPg  SgSg  DgDg  until D g = S g The price mechanism: the effect of a rise in demand The price mechanism: the effect of a rise in demand

4. Demand and supply analysis The price mechanism: effect of a rise in demand factor markets The price mechanism: effect of a rise in demand factor markets

5. Goods Market DgDg  shortage (D g > S g ) PgPg  SgSg  DgDg  until D g = S g Factor Market SgSg  SfSf  DfDf  until D f = S f  DfDf shortage (D f > S f ) PfPf  The price mechanism: the effect of a rise in demand The price mechanism: the effect of a rise in demand

6. Demand and supply analysis The demand curve

7. The demand curve: The demand for potatoes (monthly)

8. Quantity (tonnes: 000s) Price (pence per kg) Price (pence per kg) 20 Market demand (tonnes 000s) 700 A Point A Market demand for potatoes (monthly) Demand

9. Quantity (tonnes: 000s) Price (pence per kg) Price (pence per kg) 20 40 Market demand (tonnes 000s) 700 500 ABAB Point A B Demand Market demand for potatoes (monthly)

10. Quantity (tonnes: 000s) Price (pence per kg) Price (pence per kg) 20 40 60 Market demand (tonnes 000s) 700 500 350 ABCABC Point A B C Demand Market demand for potatoes (monthly)

11. Quantity (tonnes: 000s) Price (pence per kg) Price (pence per kg) 20 40 60 80 Market demand (tonnes 000s) 700 500 350 200 ABCDABCD Point A B C D Demand Market demand for potatoes (monthly)

12. Quantity (tonnes: 000s) Price (pence per kg) Price (pence per kg) 20 40 60 80 100 Market demand (tonnes 000s) 700 500 350 200 100 ABCDEABCDE Point A B C D E Demand Market demand for potatoes (monthly)

13. Demand and supply analysis Shifts in the demand curve Shifts in the demand curve

14. D1D1 Price P OQ0Q0 Q1Q1 Quantity An increase in demand D0D0

15. D0D0 Price P OQ0Q0 Q1Q1 Quantity A decrease in demand D1D1

16. Demand and supply analysis The supply curve

17. The supply curve: The supply of potatoes (monthly)

18. Price (pence per kg) Quantity (tonnes: 000s) Supply a P 20 Q 100 a Market supply of potatoes (monthly)

19. Price (pence per kg) Quantity (tonnes: 000s) Supply a b P 20 40 Q 100 200 abab Market supply of potatoes (monthly)

20. Price (pence per kg) Quantity (tonnes: 000s) Supply a b c P 20 40 60 Q 100 200 350 abcabc Market supply of potatoes (monthly)

21. Price (pence per kg) Quantity (tonnes: 000s) Supply a b c d P 20 40 60 80 Q 100 200 350 530 abcdabcd Market supply of potatoes (monthly)

22. Price (pence per kg) Quantity (tonnes: 000s) Supply a b c d e P 20 40 60 80 100 Q 100 200 350 530 700 abcdeabcde Market supply of potatoes (monthly)

23. Demand and supply analysis Shifts in the supply curve Shifts in the supply curve

24. P QO S0S0 Shifts in the supply curve

25. P QO S0S0 Increase S1S1 Shifts in the supply curve

26. P QO S2S2 S0S0 S1S1 IncreaseDecrease Shifts in the supply curve

27. Demand and supply analysis Market equilibrium

28. Equilibrium price and output : The Market Demand and Supply of Potatoes (Monthly)

29. The determination of market equilibrium (potatoes: monthly) Quantity (tonnes: 000s) E D C B A a b c d e Supply Demand Price (pence per kg)

30. Quantity (tonnes: 000s) E C B A a b c e Supply Demand Price (pence per kg) D d SURPLUS (330 000) The determination of market equilibrium (potatoes: monthly)

31. Quantity (tonnes: 000s) E D C B A a b c d e Supply Demand Price (pence per kg) SHORTAGE (300 000) The determination of market equilibrium (potatoes: monthly)

32. D d QeQe Quantity (tonnes: 000s) E B A a b e Supply Demand Price (pence per kg) The determination of market equilibrium (potatoes: monthly)

33. Demand and supply analysis Effect of shift in the demand curve

34. P Q O Pe1Pe1 Qe1Qe1 S D1D1 g Effect of a shift in the demand curve An increase in demand

35. P Q O Pe1Pe1 Qe1Qe1 S D1D1 g Effect of a shift in the demand curve

36. P Q O Pe1Pe1 Qe1Qe1 S D1D1 D2D2 g

37. P Q O Pe1Pe1 Qe1Qe1 S g h D1D1 D2D2 Pe2Pe2 Qe2Qe2 i

38. P Q O Pe1Pe1 Qe1Qe1 S D1D1 D2D2 g A decrease in demand Effect of a shift in the demand curve

39. P Q O Pe1Pe1 Qe1Qe1 S D1D1 D2D2 g Pe2Pe2 Qe2Qe2 n m

40. Demand and supply analysis Effect of shift in the supply curve

41. P Q O Pe1Pe1 Qe1Qe1 D S1S1 g Effect of a shift in the supply curve A decrease in supply

42. P Q O Pe1Pe1 Qe1Qe1 D S1S1 g Effect of a shift in the supply curve

43. P Q O Pe1Pe1 Qe1Qe1 D S1S1 S2S2 g

44. P Q O Pe1Pe1 Pe3Pe3 Qe3Qe3 Qe1Qe1 D S1S1 S2S2 jg k

45. P Q O Pe1Pe1 Qe1Qe1 D S1S1 g An increase in supply S2S2 Effect of a shift in the supply curve

46. P Q O Pe1Pe1 Qe1Qe1 D S1S1 g S2S2 p Pe2Pe2 Qe2Qe2 q