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EQUILIBRIUM
DEMAND
Demand is the desire, willingness, and
DEMAND
A demand schedule is a table that lists
Quantity Demanded
16
14
12
10
10
DEMAND
A demand schedule can be shown as
points on a graph.
DEMAND
Price (P)
18
16
14
12
Demand for Rice
10
8
6
4
2
0
10
DEMAND
What do you notice about the demand
curve?
- The demand curve slopes downward.
What does it mean?
LAW of DEMAND
The law of demand holds that other things
DEMAND
One reason the demand curve slopes
downward is due to diminishing marginal
utility
10
A Decrease in Demand
Price
per
Unit
$50
Lower Willingness to
Pay for the Same
Quantity
Less Quantity Demanded
at the Same Price
$25
Old Demand
Curve
New
Demand
Curve
11
70
80
Quantity
An Increase in Demand
Price
per
Unit
$50
Greater Willingness
to Pay for the Same
Quantity
Greater Quantity
Demanded at the Same
Price
$25
New
Demand
Curve
Old Demand
Curve
70
12
80
Quantity
outward or inward?
Demand Shifters
Important Demand Shifters:
1. Income
2. Population/No. of buyers
3. Price of Substitutes
4. Price of Complements
5. Expectations
6. Tastes
14
Price of Complements
A
A change
change in
in
Quantity
Quantity
Demanded
Demanded
23
A
A change
change
in
in Demand
Demand
Supply
Supply
Supply
A supply schedule can be shown as
points on a graph.
Supply
Supply represents the behavior
of sellers.
A Supply Curve shows the
quantity supplied at different
prices.
The Quantity Supplied is the
28
Law of Supply
What do you think happens to the quantity
29
Barrel
$55
$20
Pric
e
Quantit
y
Supplie
d
$55
50
$20
30
$5
10
$5
30
10
30
50
Quantity of Oil
(MBD)
two ways:
Horizontally: How much suppliers
Supply Curves
Why is the supply curve upward
sloping?
The cost of producing a good is not
Change in Supply
Price of
Oil per
Barrel
$50
Greater
Quantity
Supplied at
the Same
Price
Old
Supply
New
Supply
$10
Willing to
Sell Same
Quantity
at Lower
Prices
33
20
8
0
Quantity of Oil
(MBD)
Change in Supply
New
Supply
Price of
Oil
per
Barrel
$10
Smaller
Quantity
Supplied at
the Same
Price
Higher
Price
Needed
to Sell
Same
Quantity
34
Old
Supply
20
8
0
Quantity of Oil
(MBD)
shift?
Supply Shifters
Important Supply Shifters
1. Technological Innovations
2. Input Prices
3. Taxes and Subsidies
4. Expectations
5. Entry or Exit of Producers
6. Changes in Opportunity
Costs
36
Technological Innovations
1. A technological innovation makes sellers
37
Input Prices
2. A decrease in the price of an input (all
38
supply.
Graph the effect on supply of a new cigarette
tax.
39
increases supply.
Graph the effect on supply of a new subsidy
to fast food producers aimed at helping them
market and sell overseas.
40
$10
$1
0
$5
0
$10
With a $10 Tax Suppliers Require a $10 Higher Price to Sell the Same
Quantity
Price of
Supply With $10 Tax
Oil per
Barrel
$4
0
41
Expectations
4. The expectation of a higher price for a
42
Future Expectations
A change in producers
43
Expectations
Price
per
Unit
Supply Today
with Expectation
of Future Price
Increase
Supply Today
Into Storage
Quantity
44
45
Number of Producers
As more producers enter a market, supply
Pric
e
Domestic
Supply
Greater Quantity
Supplied at the
Same Price
Domestic Supply
Plus Canadian
Imports
Quantity
48
49
3- 49
$5
50
2,000
Smaller Quantity
Supplied at the Same
Price
Quantity of
Soybeans
2,80
(Millions of
0
Bushels)
of a good changes.
It is a movement along a fixed supply curve.
changes.
It is a shift in the entire supply curve.
A
A change
change in
in
Quantity
Quantity Supplied
Supplied
51
A
A change
change
in
in Supply
Supply
Discussion:
Relate the Law of Supply and Demand to