09 Market Analysis1

8/9/2019 09 Market Analysis1

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NOW PLAYING:NOW PLAYING:

MARKET ANALYSISMARKET ANALYSIS

Presented by:Presented by:Mr. KuzmichMr. Kuzmich

EconomicsEconomics


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Only two things can changeOnly two things can change

the relative scarcity of athe relative scarcity of aproductproductSupplySupply

DemandDemand


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How do changes in supplyHow do changes in supply

or demand aector demand aecte!uilibrium prices ande!uilibrium prices and!uantities e"changed#!uantities e"changed#


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$uantity E"changed$uantity E"changed

%t&s simple.%t&s simple.'n increase in supply or demand causes'n increase in supply or demand causes

an increase in !uantity e"changed.an increase in !uantity e"changed.

' decrease in supply or demand causes' decrease in supply or demand causes

a decrease in !uantity e"changed.a decrease in !uantity e"changed.


5/31

E!uilibrium PriceE!uilibrium Price

%t&s simple.%t&s simple.'n increase in supply or a decrease in'n increase in supply or a decrease in

demand puts downward pressure ondemand puts downward pressure on

prices.prices.' decrease in supply or an increase in' decrease in supply or an increase in

demand puts upward pressure on prices.demand puts upward pressure on prices.


6/31

(hanges in )upply or(hanges in )upply or

*emand*emand%mpact on%mpact onE!uilibriumE!uilibrium

PricePrice

%mpact on%mpact on$uantity$uantity

E"changedE"changed

%ncrease in%ncrease in)upply)upply

*own*own +p+p

*ecrease in*ecrease in)upply)upply

+p+p *own*own

%ncrease in%ncrease in*emand*emand

+p+p +p+p

*ecrease in*ecrease in

*emand*emand

*own*own *own*own


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(hanges in relative scarcity(hanges in relative scarcity

' product becomes' product becomes moremorescarce if:scarce if:demand increasesdemand increases

supply decreasessupply decreases

price will riseprice will rise

' product becomes' product becomes lesslessscarce if:scarce if:demand ,,,,,,,,,,,,demand ,,,,,,,,,,,,

supply ,,,,,,,,,,,,,supply ,,,,,,,,,,,,,price will ,,,,,,,,,price will ,,,,,,,,,


8/31

(hanges in relative scarcity(hanges in relative scarcity

' product becomes' product becomes moremorescarce if:scarce if:demand increasesdemand increases

supply decreasessupply decreases

price will riseprice will rise

' product becomes' product becomes lesslessscarce if:scarce if:demand decreasesdemand decreases

supply increasessupply increasesprice will fallprice will fall


9/31

-hree )teps of-hree )teps of

Maret 'nalysisMaret 'nalysis

/./. %dentify the Maret%dentify the Maret

Product0 place0 timeProduct0 place0 time

1.1. %dentify the change%dentify the change

)upply or demand0 increase or decrease#)upply or demand0 increase or decrease#

2.2. Eect on relative scarcity0 price0Eect on relative scarcity0 price0!uantity!uantity


10/31

Ma3or rule:Ma3or rule:

One event causes either demand orOne event causes either demand or

supply to change0 never both.supply to change0 never both.


11/31

Predicting the 4uturePredicting the 4uture

-he world maret for oil0 1556. %ra!-he world maret for oil0 1556. %ra!

oil wells come bac on line.oil wells come bac on line.

*emand or supply# %ncrease or*emand or supply# %ncrease ordecrease#decrease#

7elative scarcity0 price0 !uantity#7elative scarcity0 price0 !uantity#


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Predicting the 4uturePredicting the 4uture

%n )4 in 15580 the maret for 9er%n )4 in 15580 the maret for 9erstu when the 9ers0 under thestu when the 9ers0 under theamazing leadership of 'le" )mith0amazing leadership of 'le" )mith0

football playing economist0 and thefootball playing economist0 and the9ers win the )uper ;owl.9ers win the )uper ;owl.

*emand or supply# %ncrease or*emand or supply# %ncrease or

decrease#decrease#7elative scarcity0 price0 !uantity#7elative scarcity0 price0 !uantity#


13/31

E"plaining the presentE"plaining the present

Maret0 gasoline in (alifornia0 )ummer0Maret0 gasoline in (alifornia0 )ummer015561556

OPE( increases supplyOPE( increases supply

(alifornians(aliforniansbuy more0 bigger0 more powerful cars andbuy more0 bigger0 more powerful cars and

drive them farther and fasterdrive them farther and fasteravoid mass transitavoid mass transit

)ome oil re


14/31

=hat has caused=hat has caused

these prices to change#these prices to change#(omputer prices fall.(omputer prices fall. %t is )eptember and peach0 berry0 and other%t is )eptember and peach0 berry0 and other

fruit prices rise.fruit prices rise.

-he price of a ma3or league baseball star&s-he price of a ma3or league baseball star&srooie card is falling.rooie card is falling.-he price of artichoes rises.-he price of artichoes rises. )audi ing dies and price of oil rises.)audi ing dies and price of oil rises.

*ues of Hazzard comes out and price of /8*ues of Hazzard comes out and price of /8*odge (harger increases.*odge (harger increases.-he price of yo>yo&s go up and down.-he price of yo>yo&s go up and down.-he price of ancient statues falls.-he price of ancient statues falls.


15/31

E"plaining the pastE"plaining the past

Europe in /6/5. -he maret forEurope in /6/5. -he maret for

spices after da ?ama found a lessspices after da ?ama found a less

costly path to spices.costly path to spices.

)upply or demand# %ncrease or)upply or demand# %ncrease or

decrease#decrease#

7elative scarcity0 price0 !uantity7elative scarcity0 price0 !uantity


16/31

E"plaining the pastE"plaining the past

)acramento in /@65. -he maret for)acramento in /@65. -he maret for

pic a"es and pans.pic a"es and pans.

)upply or demand# %ncrease or)upply or demand# %ncrease or

decrease#decrease#

7elative scarcity0 price0 !uantity7elative scarcity0 price0 !uantity


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' Price' Price Celn!Celn!is ais ama"imum legal pricema"imum legal price

"ELOW"ELOW

the e!uilibrium.the e!uilibrium.I# pro$des per$erseI# pro$des per$ersen%en#$es& %ausn! an%en#$es& %ausn! a

s'or#a!e(s'or#a!e(Celn!& )elo*& s'or#a!eCeln!& )elo*& s'or#a!e

+C"S,+C"S,


19/31

Price controls AceilingBPrice controls AceilingB

'ssume that a maret is in e!uilibrium and'ssume that a maret is in e!uilibrium andthere is no change in supply or demandCthere is no change in supply or demandCrelative scarcity has not changed.relative scarcity has not changed.

' government sets a legal price below the' government sets a legal price below thee!uilibrium Aprice ceilingBe!uilibrium Aprice ceilingB ;uyers will want to buy ,,,,,,,,,;uyers will want to buy ,,,,,,,,, )uppliers will want to supply ,,,,,,,,)uppliers will want to supply ,,,,,,,,

-here is a Asurplus or shortageB.-here is a Asurplus or shortageB. 7ent controls0 doctors0 prescription drugs7ent controls0 doctors0 prescription drugs


20/31

' Price' Price -loor-looris ais a

minimum legal priceminimum legal priceA"O.EA"O.Ethe e!uilibriumthe e!uilibrium

I# pro$des per$erseI# pro$des per$erse

n%en#$es& %ausn! an%en#$es& %ausn! asurplus(surplus(

-loor& a)o$e& surplus-loor& a)o$e& surplus

+-AS,+-AS,


21/31

Price controls ADoorBPrice controls ADoorB

'ssume that a maret is in e!uilibrium and'ssume that a maret is in e!uilibrium andthere is no change in supply or demandCthere is no change in supply or demandCrelative scarcity has not changed.relative scarcity has not changed.

' government sets a legal price above the' government sets a legal price above thee!uilibriume!uilibrium ;uyers will want to buy ,,,,,,,,,;uyers will want to buy ,,,,,,,,, )uppliers will want to supply ,,,,,,,,)uppliers will want to supply ,,,,,,,,

-here is a Asurplus or shortageB.-here is a Asurplus or shortageB.Minimum wage0 agricultural price supportsMinimum wage0 agricultural price supports


22/31

Price controls AnaturalPrice controls Anatural

disasterBdisasterB

-he maret for lumber in os-he maret for lumber in os

'ngeles0 after an earth!uae'ngeles0 after an earth!uae

destroys many buildingsdestroys many buildings

*emand has increased.*emand has increased.

umber is now relatively,,,,,,umber is now relatively,,,,,,

scarce.scarce.

Price will ,,,,,,,,,,,,,,Price will ,,,,,,,,,,,,,,


23/31

Price controls AnaturalPrice controls Anatural

disaster0 ceilingBdisaster0 ceilingB

-o avoid Fprice gougingG government-o avoid Fprice gougingG government

sets legal price below new highersets legal price below new higher

e!uilibrium price.e!uilibrium price.

't lower price0 demanders demand't lower price0 demanders demand

,,,,,,,,

't lower price0 suppliers supply't lower price0 suppliers supply

,,,,,,,,,,,,

-he price ceiling causes a ,,,,,,,,-he price ceiling causes a ,,,,,,,,


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E"ampleE"ample

Ma"imum rent on apartments setMa"imum rent on apartments setbelow e!uilibriumbelow e!uilibrium

ower price will have what eect onower price will have what eect on

prospective demanders#prospective demanders#ower price will have what eect onower price will have what eect on

prospective suppliers#prospective suppliers#

Price below maret clearing price willPrice below maret clearing price willcause a ,,,,,,,,,,,,.cause a ,,,,,,,,,,,,.


25/31

=hat will happen to the price=hat will happen to the price

of energy in (alifornia#of energy in (alifornia#-he population increases.-he population increases.

People have more computers.People have more computers.

Many power plants are shut down forMany power plants are shut down formaintenance.maintenance.

-he snow pac in the )ierras is lower-he snow pac in the )ierras is lower

than normal.than normal.


26/31

et&s save the energyet&s save the energy

consumers of (aliforniaconsumers of (alifornia %mpose a price ceiling Aa legal price below%mpose a price ceiling Aa legal price below

the e!uilibriumBthe e!uilibriumB 's the price falls0 the incentives for's the price falls0 the incentives for

suppliers and demanders changes.suppliers and demanders changes.=ith a lower price0 suppliers will supply=ith a lower price0 suppliers will supply

,,,,,,,,,,,,,,,,=ith a lower price0 demanders will want to=ith a lower price0 demanders will want to

buy ,,,,,,,,,buy ,,,,,,,,,-here will be a ,,,,,,,,,,-here will be a ,,,,,,,,,,


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28/31

Maret 'nalysisMaret 'nalysis

(hange in(hange in)upply)upply

A='?-%PBA='?-%PB

(hange in(hange in*emand*emand

A-%P)EBA-%P)EB

E!uilibriuE!uilibrium Pricem Price

$uantity$uantity)upplied)upplied

$uantity$uantity*emande*emande

dd

$uantity$uantityE"changeE"change

dd

%ncrease%ncrease

,,,,,,,,,,,,,,,,,,

*own*own

,,,,,,,,,,,,,,,,,,

+p+p +p+p

*ecrease*ecrease

,,,,,,,,,,,,,,,,,,

+p+p

,,,,,,,,,,,,,,,,,,

*own*own *own*own

,,,,,,,,,,,,,,,,,,

%ncrease%ncrease +p+p +p+p

,,,,,,,,,,,,,,,,,,

+p+p

,,,,,,,,,,,,,,,,,,

*ecrease*ecrease *own*own *own*own

,,,,,,,,,,,,,,,,,,

*own*own


29/31

How do changes in demandHow do changes in demand

aectaect quantity suppliedquantity supplied## ' change in !uantity supplied occurs in the' change in !uantity supplied occurs in the

short>run as suppliers respond to a change inshort>run as suppliers respond to a change inthe price of the productthe price of the product with no change inwith no change inWAGTIPS.WAGTIPS.

%f demand increases0 price will rise0 and%f demand increases0 price will rise0 andsuppliers will attempt to s!ueeze more out ofsuppliers will attempt to s!ueeze more out oftheir resources with no change in ='?-%P).their resources with no change in ='?-%P).

%f demand falls0 price will fall0 causing%f demand falls0 price will fall0 causingsuppliers to supply less0 with no change insuppliers to supply less0 with no change in

='?-%P).='?-%P). (hange in demand causes a change in price(hange in demand causes a change in price

which causes a change inwhich causes a change in quantity suppliedquantity supplied00no change in ='?-%P).no change in ='?-%P).


30/31

How do changes in supply aectHow do changes in supply aect

quantity demandedquantity demanded## ' change in !uantity demanded occurs as' change in !uantity demanded occurs as

buyers respond to a change in the price ofbuyers respond to a change in the price ofthe productthe product with no change in TIPSE.with no change in TIPSE. %f%fsupply increases0 price will fall and buyerssupply increases0 price will fall and buyerswill buy more with no change in -%P)E.will buy more with no change in -%P)E.

%f supply decreases0 price will rise and%f supply decreases0 price will rise andbuyers will buy less with no change inbuyers will buy less with no change in-%P)E.-%P)E.(hange in supply causes a change in price(hange in supply causes a change in price

which causes a change inwhich causes a change in quantityquantitydemandeddemanded with no change in -%P)E.with no change in -%P)E.


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$uestions$uestions

*emand or supply#*emand or supply#

%ncrease or decrease#%ncrease or decrease#

E!uilibrium price#E!uilibrium price#$uantity supplied#$uantity supplied#

$uantity demanded#$uantity demanded#

$uantity e"changed#$uantity e"changed#

09 Market Analysis1

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