Supply and Supply and DemandDemand

DemandDemand

SupplySupply

Business and LaborBusiness and Labor

DemandDemandDemandDemand The desire, willingness, The desire, willingness,

and ability to buy a and ability to buy a good or servicegood or service you you must WANT a productmust WANT a product

Demand schedules Demand schedules organize the quantity organize the quantity of a product that of a product that someone is willing to someone is willing to buy at a range of buy at a range of possible pricespossible prices

Demand can be shown Demand can be shown using a graphusing a graphdemand demand curvecurve

Demand ScheduleDemand Schedule

PricePrice QuantityQuantity

$50$50 00

$40$40 11

$30$30 11

$20$20 22

$10$10 33

$5$5 55

DemandDemand

Law of DemandLaw of Demand Quantity Quantity demanded and price move in demanded and price move in opposite directions (the higher the opposite directions (the higher the price, the lower the demand and vice price, the lower the demand and vice versa)versa)

DemandDemand

Individual vs. Market DemandIndividual vs. Market Demand Companies are interested in what Companies are interested in what

everybody wants, not just one personeverybody wants, not just one person Market DemandMarket Demand the total demand of all the total demand of all

consumersconsumers Everything we buy has a Everything we buy has a utilityutility

(satisfaction we get from product)(satisfaction we get from product) After a while, we get less and less pleasure After a while, we get less and less pleasure

from a product, the more we use itfrom a product, the more we use it diminishing marginal utilitydiminishing marginal utility

This is why a demand curve slopes down- This is why a demand curve slopes down- consumers are unwilling to pay a high consumers are unwilling to pay a high price for something that does not bring as price for something that does not bring as much pleasuremuch pleasure

DemandDemand

Factors affecting DemandFactors affecting Demand When demand goes down, people are When demand goes down, people are

willing to buy fewer items at a certain willing to buy fewer items at a certain pricepricecurve shifts to leftcurve shifts to left

DemandDemand

When demand goes up, people are willing When demand goes up, people are willing to buy more of the same item at any given to buy more of the same item at any given pricepricecurve shifts to rightcurve shifts to right

DemandDemand

Factors affecting DemandFactors affecting Demand 1. Changes in number of Consumers1. Changes in number of Consumers more more

consumers, more demandconsumers, more demand 2. Change in consumers’ income2. Change in consumers’ income more income, more income,

more demandmore demand 3. Change in consumers’ taste3. Change in consumers’ taste more popular, more popular,

more demandmore demand 4. Change in consumers’ expectations4. Change in consumers’ expectationsway ppl. way ppl.

think about futurethink about future 5. Change in 5. Change in substitutessubstitutes demand changes in demand changes in

competing products change (computers)competing products change (computers) 6. Changes in 6. Changes in complementscomplements products that are products that are

used together (DVD and DVD player)used together (DVD and DVD player)

DemandDemand

Elastic vs. Inelastic DemandElastic vs. Inelastic Demand Sometimes demand is elastic- Sometimes demand is elastic-

demand for a product responds demand for a product responds greatly to a change in price (Cars)greatly to a change in price (Cars)

Demand is inelastic when price Demand is inelastic when price changes have very little effect on the changes have very little effect on the demand for the product (Medicine)demand for the product (Medicine)

SupplySupplyWhat is Supply?What is Supply? Supply is all the quantities of Supply is all the quantities of

goods/services producers are goods/services producers are wiling to sell at all possible wiling to sell at all possible pricesprices opposite of demand opposite of demand

Buyers demand different Buyers demand different numbers of goods based on numbers of goods based on the selling price of an itemthe selling price of an item

Law of SupplyLaw of SupplyAs the price As the price goes up, the quantity goes up, the quantity supplied rises, as the price supplied rises, as the price goes down, the quantity goes down, the quantity supplied lowerssupplied lowers

Supply can be represented in Supply can be represented in a chart and a graph, like a chart and a graph, like demand demand

Supply Supply ScheduleSchedule

PricePrice QuantitQuantityy

$50$50 100100

$40$40 9090

$30$30 7070

$20$20 3030

$10$10 1010

$5$5 11

SupplySupply A supply curve slopes upwardA supply curve slopes upward suppliers are willing to offer suppliers are willing to offer

mores goods/services at a higher price and fewer at a lower mores goods/services at a higher price and fewer at a lower priceprice

Businesses hope to make a Businesses hope to make a profitprofit- money received for its - money received for its product above the amount spent for costproduct above the amount spent for cost

PricePrice is the most significant influence on the quantity is the most significant influence on the quantity suppliedsupplied

SupplySupplyChanges in SupplyChanges in Supply Supply increases and decreases Supply increases and decreases

depending on certain factorsdepending on certain factors When supply goes down, the supply curve When supply goes down, the supply curve

moves to the moves to the leftleft

SupplySupply

When supply goes up, the supply When supply goes up, the supply curve moves to the curve moves to the rightright

SupplySupply

Factors Affecting SupplyFactors Affecting Supply Cost of the resource- when cost of the Cost of the resource- when cost of the

factors of production go up or downfactors of production go up or down Productivity- if a business is more Productivity- if a business is more

efficient, it will save money and supply efficient, it will save money and supply will go upwill go up

TechnologyTechnology Change in Government Policy- gov’t Change in Government Policy- gov’t

makes new laws/regulations affecting makes new laws/regulations affecting price or productivity, supply goes up or price or productivity, supply goes up or downdown

SupplySupply

Elasticity of SupplyElasticity of Supply A measure of how the quantity of a A measure of how the quantity of a

good changes in response to a good changes in response to a change in pricechange in price

If quantity changes a lot, product is If quantity changes a lot, product is elastic, if not, it is inelasticelastic, if not, it is inelastic

Business and LaborBusiness and LaborThree Types of BusinessesThree Types of Businesses

1. 1. Proprietorship Proprietorship- a business owned and operated - a business owned and operated by a single personby a single personPros: Flexibility- you are your own bossPros: Flexibility- you are your own bossCons: Financial responsibilityCons: Financial responsibility unlimited liabilityunlimited liability; ; difficult to raise capital; finding employeesdifficult to raise capital; finding employees2. 2. PartnershipPartnership- a business owned by 2 or more ppl.- a business owned by 2 or more ppl.Pros: Make more moneyPros: Make more moneyCons: Complex legal structure; owners have unlimited Cons: Complex legal structure; owners have unlimited liability (assume all debts)liability (assume all debts)3. 3. CorporationsCorporations- Business recognized by the federal - Business recognized by the federal governmentgovernment must have a charter (gov’t permission) must have a charter (gov’t permission) to start corporation, certain number of to start corporation, certain number of stocksstocks, , stockholders, and a board of directorsstockholders, and a board of directorsPros: Easy to find capital; become huge; Pros: Easy to find capital; become huge; limited limited liabilityliability the company, not individual, pays for debts the company, not individual, pays for debtsCons: Expensive; business owners have little say in Cons: Expensive; business owners have little say in running companyrunning company

Business and LaborBusiness and Labor

Labor UnionsLabor Unions Groups of workers who band together to have a Groups of workers who band together to have a

better chance of making more money and better better chance of making more money and better working conditionsworking conditions

2 types of unions: 2 types of unions: craft unionscraft unions(perform the (perform the same skills)same skills), industrial unions, industrial unions(work in the same (work in the same industry)industry)

Closed UnionsClosed Unions require you to join if you work for require you to join if you work for a particular company; a particular company; Union shopsUnion shops allow allow companies to hire non union people, but they companies to hire non union people, but they must join once they are hiredmust join once they are hired

Right-to-workRight-to-work states prevent mandatory union states prevent mandatory union membershipmembership

Business and LaborBusiness and Labor Labor unions negotiate in different waysLabor unions negotiate in different ways

Collective BargainingCollective Bargaining: Co. boss and Union : Co. boss and Union boss negotiateboss negotiate

MediationMediation: Bring a 3rd party into talks, give : Bring a 3rd party into talks, give adviceadvice

ArbitrationArbitration: 3rd Party decides disagreement: 3rd Party decides disagreement When negotiations break down, unions When negotiations break down, unions

use different techniquesuse different techniques Strike or BoycottStrike or Boycott management can management can lockoutlockout

employees; court order employees; court order injunctioninjunction to prevent to prevent strikestrike

Business and LaborBusiness and Labor

Responsibility of the BusinessResponsibility of the Business ConsumerConsumer- sell quality products - sell quality products

that are safethat are safe Owners of the businessOwners of the business- reveal - reveal

financial info to stockholders financial info to stockholders ((transparencytransparency))

EmployeesEmployees- safe workplace, treat - safe workplace, treat workers without discriminationworkers without discrimination