Supply & Demand using them to make decisions. Market… A buyer and seller coming together to...
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Transcript of Supply & Demand using them to make decisions. Market… A buyer and seller coming together to...
Consumer-Supplier Interaction
• How market prices are determined
• How goods and services are allocated
• Not necessarily a physical space…internet
DEMAND
• Consumer:– How much a consumer will buy– Willingness to purchase– Able to buy a certain quantity
Law of Demand
(holding everything else unchanged)
the quantity demand of a g/s at a lower price will be greater than the quantity
demanded at a higher price
Changes in Demand Curve
1. Change in quantity demanded
…A change in price
Point moves along current demand
curve
2. Change in demand…A change in outside
factorsShifts the entire
demand curve…left or right
Change of demand determinants:
• Changes in income• Changes in consumer information• Changes in the prices of a substitute or
complementary good• Changes in consumer preferences or tastes• Changes in consumer population• Changes in consumer expectations of the
future
What goes together?
SUBSTITUTE(in place of other goods)
COMPLEMENTARY(goes together)
QuickTime™ and a decompressor
are needed to see this picture.
Overall Market Demand Schedule
The sum of quantities demanded by all individuals who make up the market
QuickTime™ and a decompressor
are needed to see this picture.
Law of Supply
(holding everything else unchanged)
As the price of a good or service increases, suppliers will offer more units for sale.
Changes in Supply Curve1. Change in Quantity
Supplied…change in price, moves
along current supply curve
Points move along the supply curve
2. Change in Supply
…change in other factors
Shifts the entire supply curve…left or right
Change in supply determinants:
• Change in price of production inputs• Environmental conditions (such as
changes in weather/natural disasters)
• Technological advancements• The number of suppliers in the market• Future expectations of prices• Prices of other goods and services in
the market