1. MANAGERIAL ECONOMICS 11th EditionBy
Mark Hirschey

2. Demand and Supply
Chapter 3

3. Chapter 3 OVERVIEW Basis for Demand Market Demand Function
Demand Curve
Basis For Supply
Market Supply Function
Supply Curve
Market Equilibrium

4. Chapter 3 KEY CONCEPTS demand direct demand utility derived demand
demand function
demand curve
change in the quantity demanded
shift in demand
Supply
supply function
supply curve
change in the quantity supplied
shift in supply
equilibrium
market equilibrium price
surplus
shortage
comparative statics analysis

5. Basis for Demand Direct Demand Derived Demand
Demand is the quantity customers are willing to buy under current market conditions.
Direct demand is demand for consumption.
Derived Demand
Derived demand is input demand.
Firms demand inputs that can be profitably employed.

6. Market Demand Function
Determinants of Demand
Demand is determined by price, prices of other goods, income, and so on.
Industry Demand Versus Firm Demand
Industry demand is subject to general economic conditions.
Firm demand is determined by economic conditions and competition.

7. Demand Curve Demand Curve Determination
The price-quantity demanded relation.
All non-price variables are held constant.

9. Relation Between the Demand Curve and Demand Function
Move along demand curve when price changes.
Shift to another demand curve when non-price variables change.

11. Basis For Supply How Output Prices Affect Supply
Firms offer supply to make profits.
Higher prices boost the quantity supplied.
Lower prices cut the quantity supplied.
Other Factors That Influence Supply
Everything that affects marginal production costs affects supply.
If MC falls, supply rises.
If MC rises, supply falls.

12. Market Supply Function
Determinants of Supply
Supply is determined by price, prices of other goods, technology, and so on.
Industry Supply Versus Firm Supply
Firm supply is determined by economic conditions and competition.
Industry supply is the horizontal sum of firm supply.

13. Supply Curve Supply Curve Determination
The price-quantity supplied relation.
All non-price variables are held constant.

15. Relation Between Supply Curve and Supply Function
Move along supply curve when price changes.
Shift to another curve when non-price variables change.

17. Market Equilibrium Surplus and Shortage Surplus is excess supply.
Shortage is excess demand.

19. Comparative Statics: Changing Demand
Equilibrium changes with demand shifts.
Comparative Statics: Changing Supply
Equilibrium changes with supply shifts.
Comparative Statics: Changing Demand and Supply