1. Supply and Demand Business Economics

2. Demand  A range of Prices and Quantities  Price is termed Demand Price  the maximum price that buyers are willing and able to pay for a given quantity of a good. They would be willing to pay less than this price, but not more  Quantity is termed Quantity Demanded  the specific amount of a good that buyers are willing and able to purchase at a given demand price. The quantity demanded is the maximum amount of the good that buyers are willing and able to buy at the given price

3. Supply  Total amount of a product (good or service) available for purchase at any specified price  Price: producers will try to obtain the highest possible price whereas the buyers will try to pay the lowest possible price— both settling at the equilibrium price where supply equals demand  Cost of inputs: lower the input price the higher the profit at a price level and more product will be offered at that price  Price of other goods: lower prices of competing goods will reduce the price and the supplier may switch to switch to more profitable products thus reducing the supply

4. Conditions Required for Demand to Exist  Willingness  arises because the good satisfies a want or need  everyone does NOT necessarily want or need every good or service available  Ability  buyer must have enough income to make a purchase

5. Law of Supply and Demand  The relationship between supply and demand determines the price and the quantity produced  A change in either will lead to changes in price and/or amount produced in order to achieve equilibrium in the market

6.  Essentially the notion of stretchability, that is, how easily a particular variable is to stretch  some variables are hard to stretch, meaning a great deal of force must be applied to induce changes  other variables are stretched quite easily, with little force needed to entice changes  Exists if small changes in one variable cause relatively large changes in another variable  An elastic relationship between two variables is a very responsive, or stretchable, relationship

7. Factors That Affect Elasticity  Price  Quantity

8. Understanding Elasticity  Duncan Thurly  It is analogously important to economics and market exchanges  for markets, the force of gravity is replaced by changes in price and the plummeting body is replaced by changes in quantity

9. Factors That Affect Demand  Price of the product  The consumer’s income  The price of related goods  The tastes and preferences of consumers  The consumer’s expectations  The number of consumers in the market

10. Factors That Affect Supply  The price of inputs  The current state of production technology  The producer’s expectations  The number of producers in the market