Bài giảng demand supply

Topic (a) Demand & Supply Module Topic Demand & Supply 1. Demand 2. Supply 3. Market Equilibrium 4. Consumer & Producer Surplus 1.1 What is demand?  No. of units of a good or service that consumers are willing and able to purchase during a period, under a given set of conditions 1.2 Why is the study of demand important for firms?    Determines a firm’s profitability Affect long run planning and strategic decisions Affects short run decisions Market Demand Schedule for Compact Discs per year Price $25 $20 $15 $10 $5 Fred Mary Total Demanded + = 3 5 12 P $20 $15 Fred’s Demand Curve $10 $5 D1 Q P $20 $15 Mary’s Demand Curve $10 $5 D2 Q P Market Demand Curve $20 $15 $10 $5 D3 Q 101112 P $20 $15 Fred’s Demand Curve $10 P $20 $15 Mary’s Demand Curve $10 $5 Q 12 P D2 $5 D1 Q 13 Market Demand Curve $20 $15 $10 $5 D3 Q 10 11 12 14 1.3  The Law of demand: Law of Demand:   There is an inverse relationship b/w the price of a good and the quantity buyers are willing to purchase in a defined time period, other things being the same (ceteris paribus). When the price of a good rises the quantity demanded will fall and vice versa. Consumer surplus P P1 Total consumer expenditure D O Q1 fig Q Copyright 2001 Pearson Education Australia Consumer surplus P P1 Total consumer surplus Total consumer expenditure D O Q1 fig Q Copyright 2001 Pearson Education Australia Consumer Surplus  CS is the area between the demand curve and the market price line.  It measures how much the consumer gains from buying goods in the market 4.2 Producer surplus   the amount producers receive (market price) above the minimum price required to make them supply the good (shown on the supply curve)  Producer surplus is the area between the Price line and the Supply curve P Producer surplus S Total Producer surplus Market price P1 Producer Surplus O Q1 fig Q Copyright 2001 Pearson Education Australia 4.3 CS and PS – Economic efficiency  CS and PS are an important tool for measuring the performance of an economic system  or for assessing the impact of alternative government policies in that system. P CS and PS – Economic efficiency S CS Pm Producer PS Surplus D O Qm fig Q Copyright 2001 Pearson Education Australia P CS and PS – Economic efficiency Deadweight loss: area A + B S CS A Pm B Producer PS Surplus D O Too little fig Q Copyright 2001 Pearson Education Australia P CS and PS – Economic efficiency S CS C Pm D Negative PS & Negative CS: area C + D Producer PS Surplus D O fig Too much Q Copyright 2001 Pearson Education Australia P CS and PS – Economic efficiency S CS Pm Producer PS Surplus D O Efficient fig Q Copyright 2001 Pearson Education Australia [...]... QUANTITY DEMANDED AND A CHANGE IN DEMAND When price changes, what happens? The curve does not shift - there is a change in the quantity demanded Change in Quantity Demanded Change in Price P $20 $15 $10 $5 A change in price causes a change in the quantity demanded A B D Q 10 20 30 40 50 Decrease in quantity demanded Upward movement along the demand curve Price increases Increase in quantity demanded... (citeris paribus) An Individual Seller’s Supply for Compact Discs Point A B C Price $20 10 6 Quantity 40 30 20 P $20 A company’s Supply Curve for Compact Discs Supply Curve A $15 B $10 C $5 10 20 30 40 Q Why do supply curves have a positive slope?  A higher price means more profitable to suppliers/sellers  Therefore, they will supply more of the good or service Market Supply Schedule for Compact Discs... Expected price changes Incomes Tastes, preferences, fashions, trends Advertising Shift in Demand Curve A change in demand results from a change in one or more of determinants of demand, other than the price of the goods Price Decrease Increase A change in demand can be represented by a shift in the position of the demand curve P D0 0 Q2 Q0 Q1 D1 Quantity Some definitions…     Substitute goods are... expensive clothes and cars 2 What is Supply ?  No of units of a good or service firms are willing and able to produce during a period, under a given set of conditions 2.2 Law of Supply There is a direct relationship between the price of a good and the quantity sellers are willing to offer for sale in a defined time period, ceteris paribus 2.1 Supply curve Supply curve:  The supply curve shows the relationship...1.3  Law of demand Reasons for inverse relationship: Income effect: ↑P=> ↓ Real income => ↓ Purchasing power => ↓ Qd  Substitution effect: ↑P => the good becomes relatively more expensive => consumers switch to other products => ↓ Qd  1.4 Demand curve  The demand curve illustrates the relationship b/w the quantity demanded and the price of a good (assuming all other influences on the demand are held... quantity demanded Downward movement along the demand curve Price decreases When something changes other than price, what happens? The whole curve shifts,there is a change in demand P $20 $15 When the ceteris paribus assumption is relaxed, the whole curve can shift A $10 B D2 D1 $5 10 20 Q 30 40 50 Change in demand Change in nonprice determinant What can cause a demand curve to shift? A change in:   ... are goods that are used in conjunction with each other (eg Bread and butter) Normal goods are goods whose demand varies directly with income (also known as superior goods) Inferior goods are goods whose demand varies inversely with income 1.4 Psychological (or nonfunctional) factors affecting demand:    Bandwagon effect  Everyone is doing it, so will I Snob effect  Not everyone can do it, so I... situation where the more of goods are sold in the market, the greater the strength of demand for that goods “Jumping on the bandwagon”  Because some consumers possess the goods, it causes other consumers to desire it  This is often the case with new consumer goods introduced onto the market eg, plasma TV, iPod Snob effect  Demand for the good strengthens as the availability of that good is reduced  The... supply more of the good or service Market Supply Schedule for Compact Discs per year Price $25 $20 $15 $10 $5 Super Sound High Vibes Total 25 + 35 = 20 30 15 25 10 20 5 15 60 50 40 30 20 P Super Sound Supply Curve S1 $25 $20 $15 $10 10 15 20 25 Q . Topic 2 (a) Demand & Supply Module 2 Topic 1 Demand & Supply 1. Demand 2. Supply 3. Market Equilibrium 4. Consumer & Producer Surplus 1.1 What is demand?  No. of units. => the good becomes relatively more expensive => consumers switch to other products => ↓ Qd 1.4 Demand curve  The demand curve illustrates the relationship b/w the quantity demanded. rises the quantity demanded will fall and vice versa. 1.3 Law of demand  Reasons for inverse relationship:  Income effect: ↑P=> ↓ Real income => ↓ Purchasing power => ↓ Qd  Substitution