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Supply & Demand using them to make decisions. Market… A buyer and seller coming together to exchange goods and services.

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Presentation on theme: "Supply & Demand using them to make decisions. Market… A buyer and seller coming together to exchange goods and services."— Presentation transcript:

1 Supply & Demand using them to make decisions

2 Market… A buyer and seller coming together to exchange goods and services

3 Consumer-Supplier Interaction How market prices are determined How goods and services are allocated Not necessarily a physical space…internet

4 DEMAND Consumer: –How much a consumer will buy –Willingness to purchase –Able to buy a certain quantity

5 Law of Demand ( holding everything else unchanged) the quantity demand of a g/s at a lower price will be greater than the quantity demanded at a higher price

6 Demand Curve Negative relationship (due to incentives)

7 Changes in Demand Curve 1. Change in quantity demanded …A change in price Point moves along current demand curve 2. Change in demand …A change in outside factors Shifts the entire demand curve…left or right

8 Change of demand determinants: Changes in income Changes in consumer information Changes in the prices of a substitute or complementary good Changes in consumer preferences or tastes Changes in consumer population Changes in consumer expectations of the future

9 Types of Goods NORMAL (constantly buy) INFERIOR (will “upgrade” w/inc. income)

10 What goes together? SUBSTITUTE (in place of other goods) COMPLEMENTARY (goes together)

11 Overall Market Demand Schedule The sum of quantities demanded by all individuals who make up the market

12 SUPPLY Suppliers: -must allocate scarce resources -must decide which goods to produce/not produce

13 Law of Supply (holding everything else unchanged) As the price of a good or service increases, suppliers will offer more units for sale.

14 Supply Curve Positive relationship (incentive to create larger profit)

15 Changes in Supply Curve 1.Change in Quantity Supplied … change in price, moves along current supply curve Points move along the supply curve 2.Change in Supply …change in other factors Shifts the entire supply curve…left or right

16 Change in supply determinants: Change in price of production inputs Environmental conditions (such as changes in weather/natural disasters) Technological advancements The number of suppliers in the market Future expectations of prices Prices of other goods and services in the market

17 Market Supply Schedule


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