Market Economies at Work: Supply and Demand. Demand $ The Desire for a Good or Service and the...
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Transcript of Market Economies at Work: Supply and Demand. Demand $ The Desire for a Good or Service and the...
![Page 1: Market Economies at Work: Supply and Demand. Demand $ The Desire for a Good or Service and the Ability to Pay for It.](https://reader030.fdocuments.in/reader030/viewer/2022032516/56649b56550346318e8d430f/html5/thumbnails/1.jpg)
Market EconomiesMarket Economiesat Work:at Work:
Supply and DemandSupply and Demand
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DemandDemand$ The Desire for a Good or Service
and the Ability to Pay for It
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Law of DemandLaw of Demand$ When Prices Fall Consumers Buy More
$ When Prices Rise Consumers Buy Less
![Page 4: Market Economies at Work: Supply and Demand. Demand $ The Desire for a Good or Service and the Ability to Pay for It.](https://reader030.fdocuments.in/reader030/viewer/2022032516/56649b56550346318e8d430f/html5/thumbnails/4.jpg)
Demand SchedulesDemand Schedulesand Curvesand Curves
![Page 5: Market Economies at Work: Supply and Demand. Demand $ The Desire for a Good or Service and the Ability to Pay for It.](https://reader030.fdocuments.in/reader030/viewer/2022032516/56649b56550346318e8d430f/html5/thumbnails/5.jpg)
The Law of Diminishing The Law of Diminishing Marginal UtilityMarginal Utility
$ The Benefit from each Individual Unit Tends to decline
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Factors Affecting DemandFactors Affecting Demand
$ Income
$ Market Size
$ Consumer Taste
$ Consumer Expectations
$ Substitutes
$ Complements
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Elasticity of DemandElasticity of Demand
The Responsiveness of Consumers to The Responsiveness of Consumers to Changes in Price in a MarketChanges in Price in a Market
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What Determines ElasticityWhat Determines Elasticity
$ Substitute Goods/Services
$ Proportion of Income
$ Necessities vs Luxuries
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Calculating ElasticityCalculating Elasticity
$ Businesses Have to Calculate Elasticity
$ Should they put Products on Sale? Will it increase the Number Sold?
$ Total Revenue Test: Will Selling MoreProducts at a Lower Price Make you More Money?
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SupplySupply
$ The Willingness and Ability of Producers to Offer Goods and Services for Sale
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Law of SupplyLaw of Supply$ Producers are Willing to Sell More of a Good/Service at a High Price than a Low One
![Page 12: Market Economies at Work: Supply and Demand. Demand $ The Desire for a Good or Service and the Ability to Pay for It.](https://reader030.fdocuments.in/reader030/viewer/2022032516/56649b56550346318e8d430f/html5/thumbnails/12.jpg)
Supply SchedulesSupply Schedulesand Curvesand Curves
![Page 13: Market Economies at Work: Supply and Demand. Demand $ The Desire for a Good or Service and the Ability to Pay for It.](https://reader030.fdocuments.in/reader030/viewer/2022032516/56649b56550346318e8d430f/html5/thumbnails/13.jpg)
Cost of ProductionCost of Production
$ Labor Affects Production:Efficiency and Utilization
![Page 14: Market Economies at Work: Supply and Demand. Demand $ The Desire for a Good or Service and the Ability to Pay for It.](https://reader030.fdocuments.in/reader030/viewer/2022032516/56649b56550346318e8d430f/html5/thumbnails/14.jpg)
Costs of ProductionCosts of Production
$ Fixed Costs
$ Variable Costs
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Factors Affecting SupplyFactors Affecting Supply$ Input Costs
$ Labor Productivity
$ Technology
$ Government Action
$ Producer Expectations
$ Number of Producers
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Elasticity of SupplyElasticity of Supply
The Responsiveness of Producers to The Responsiveness of Producers to Price ChangesPrice Changes
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Demand, Supply & Demand, Supply & PricesPrices
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Shortage vs SurplusShortage vs Surplus
Supply > Demand = SurplusSupply > Demand = Surplus
Demand > Supply = ShortageDemand > Supply = Shortage
PricesPrices
PricesPrices
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Reaching Equilibrium PriceReaching Equilibrium Price
40 Salads40 Salads $10 each$10 each Sells only 10Sells only 10
15 Salads15 Salads $4 each$4 each 50 requests50 requests
25 Salads25 Salads $6 each$6 each Sells 25Sells 25
Equilibrium ReachedEquilibrium Reached
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Equilibrium Price in Real Equilibrium Price in Real LifeLife
DemandDemandoror
SupplySupply
DemandDemandoror
SupplySupply
Equilibrium Equilibrium PricePrice
Equilibrium Equilibrium PricePrice
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Prices as Signals & IncentivesPrices as Signals & Incentives$ Competitive Pricing
$ Prices and Producers
$ Prices and Consumers
$20$20 $13$13
Rising Rising Prices?Prices?
Enter Enter MarketMarket
Falling Falling Prices?Prices?
Leave Leave MarketMarket
LowLowPrice?Price? BUY!!!BUY!!! HighHigh
Price?Price? DON’T BUY!!!DON’T BUY!!!
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High Price as Signal to Buy?High Price as Signal to Buy?
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Intervention in the Price Intervention in the Price SystemSystem
$ Price Ceilings
$ Price Floors
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Rationing Resources & Rationing Resources & ProductsProducts
$ World War II (other crises)
$ Black Markets
Unplanned Results of Rationing, or other Unplanned Results of Rationing, or other government regulationgovernment regulation