Demand and Supply in Microeconomicss

Macroeconomics is a branch of economics dealing with the performance, structure, behavior, and decisionmaking of an economy as a whole, rather than individual markets. This includes national, regional, and global economies. With microeconomics, macroeconomics is one of the two most general fields in economics.

DANANG UNIVERSITY UNIVERSITY OF ECONOMICS TRADE DEPARTMENT  MICROECONOMICS Demand and Supply Teacher: Nguyen Huu Hien Members of group: • Le My Linh • Duong Minh Ha • Le Thanh Quyen • Le Thi Truc Kieu • Huynh Thi Thuy Trang • Hoang Thi Phuong Thao Class: 39K01.1-CLC Dec 11 DEMAND and SUPPLY MICROECONOMICS and MACROECONOMICS   Microeconomics is a branch of economics that studies the behavior of individual economics units: consumers, workers, investors, owners of land, business firms in making decisions on the allocation of limited resources Typically, it applies to markets where goods or services are bought and sold Microeconomics examines how these decisions and behaviors affect the supply and demand for goods and services, which determines prices, and how prices, in turn, determine the quantity supplied and quantity demanded of goods and services This is in contrast to macroeconomics, which involves the sum total of economic activity, dealing with the issues of growth, inflation, and unemployment Macroeconomics is a branch of economics dealing with the performance, structure, behavior, and decision-making of an economy as a whole, rather than individual markets This includes national, regional, and global economies With microeconomics, macroeconomics is one of the two most general fields in economics MICROECONOMICS 14 Dec 11 DEMAND and SUPPLY DEMAND and SUPPLY    Demand Definition: Demand is a schedule or a curve that shows the various amounts of product that consumers are willing and able to purchase at each of a series of possible prices during a specified period of time The demand curve: the inverse relationship between price and quantity demanded for any product can be represented on a simple graph, in which, by convention, we measure quantity demanded on the horizontal axis and price on the vertical axis Such a curve is called a demand curve Its downward slope reflects the law of demand – people buy more of a product, service, or resource as its price falls Ex: P D Q Determinants of demand: the demand curve shifts because of changes in: • Consumer tastes • The number of buyers in the market • Consumer income • The prices of substitute or complementary goods • Consumer expectations MICROECONOMICS 14 Dec 11 DEMAND and SUPPLY Market demand: market demand includes all of individual demands on the market In theory, market demand is obtained by adding all the individual quantities demanded at each price; we then plot the price and the total quantity demanded as one point on the market demand curve Change in demand: a change in demand schedule or, graphically, a shift in the demand curve is called a change in demand It occurs because the consumer’s state of mind about purchasing the product has been altered in response to a change in one or more of the determinants of demand If consumers desire to buy more corn at each possible price, that increase in demand is shown as a shift of the demand curve to the right Changes in quantity demanded: is a movement from one point to another point – from one price-quantity combination to another- on a fixed demand schedule or demand curve The cause of such a change is an increase or decrease in the price of the product under consideration This is a simple example: With the price 15,000 VND/kg of oranges, consumer A is ready to buy kg for his family for one day in hot summer months, 2008 in Hanoi However, when the price increases by 30,000 VND/kg, that consumer only desire to and afford to buy kg When the orange price is 15,000 VND/kg, the oranges quantity demanded is marketed to 10 tons per day But when the price increases by 30,000 VN/kg, there are only tons of oranges per day in Hanoi market So, with the different price, the consumers will desire to and afford to buy different quantities of articles Whereby, we see that the oranges quantity demanded of consumer A in Hanoi is kg/day while Hanoi market demand is 10 tons of oranges per day when the orange price is 15,000 VND/kg in summer, 2008 MICROECONOMICS 14 Dec 11 DEMAND and SUPPLY  Supply Definition: supply is a schedule or curve showing the amounts of a product that producers are willing and able to make available for sale at each of a series of possible prices during a specific period The supply curve: the covariate relationship between prices and quantity supplied for any product can be represented on a simple graph, in which, by convention, we measure quantity supplied on the horizontal axis and price on the vertical axis Such a curve is called a supply curve Its upward slope reflects the law of supply – as price rises, the quantiy supplied rises; as price falls, the quantity supplied falls Ex: P S Determinants of supply: • Resource prices • Technology • Taxes and subsidies • Prices of other goods • Price expectations • The number of sellers in the market MICROECONOMICS Q 14 Dec 11 DEMAND and SUPPLY Changes in supply: is a change in the schedule and a shift of the supply curve An increase in supply shifts the curve to the right, a decrease in supply shifts it to the left The cause of a change in supply is a change in one or more of the determinants of supply Changes in quantity supplied: is a movement from one point to another on a fixed supply curve Quantity supplied changes only when the price changes This is a simple example: With the price 15,000 VND/kg of oranges, producer A is ready to provide Hanoi market with 10 tons of oranges per day When the price increase by 30,000 VND/kg, then they see that profit is increasing, producer A desires to supply 20 tons of oranges per day, but in fact they can afford to supply 15 tons/day to the market So, Hanoi market supply here is 15 tons/day when the orange price is 30,000 VND/kg We see that, with the different price, the producers only will be ready to supply different products to the market The higher the price, the more products will the producers be ready to supply than the previous lower price But this supply is depended on the producing abilities Then they can’t produce enough even though they know the profit is really good MICROECONOMICS 14 Dec 11 DEMAND and SUPPLY Bird Flu in U.S Clips Industry's Wing By SCOTT KILMAN Staff Reporter of THE WALL STREET JOURNAL The appearance of a mild form of avian influenza in Delaware is hobbling the U.S poultry industry's plans to capitalize on the outbreak of a far more dangerous type of the disease across Asia Chicken giant Tyson Foods Inc and its U.S rivals had hoped to quickly increase their sales to customers such as Japan, which has had to cut off chicken shipments from its two biggest Asia suppliers Thailand and China as those countries struggle to control a type of the bird virus that can kill people In part because of the outbreak across Asia, economists at the U.S Agriculture Department have projected, as recently as Tuesday, that U.S poultry exports will grow 6.8% in 2004 to 5.3 billion pounds Japan imported roughly $50 million of U.S chicken meat last year The outbreak in Delaware, which state officials said Tuesday had spread to a second poultry farm, has prompted Japan and 10 other countries to impose full or partial bans on U.S poultry The virus in Delaware isn't the type that infects MICROECONOMICS 14 Dec 11 DEMAND and SUPPLY people, but it is dangerous enough to birds that U.S poultry exports probably won't return to normal for at least several weeks, industry officials said "The Delaware outbreak is complicating things," said Toby Moore, a vice president of the USA Poultry & Egg Export Council in Stone Mountain, Ga A major chicken brand was drawn into the Delaware outbreak Tuesday when closely held Perdue Farms Inc was forced to destroy a flock of 72,000 birds in which the respiratory virus was detected The discovery was a surprise because the relatively mild H-7 strain of the virus in Delaware is primarily spread among a less-sophisticated type of poultry farm than that run by Perdue, which raises and slaughters chickens for brand-name products sold in the nation's major supermarkets The virus is typically spread among so-called backyard flocks that are raised by small farms for sale to a niche market of consumers who prefer to buy live chickens Low-pathogenic types of the flu virus now being found in Delaware have infected poultry farms in several states in recent years Officials of Perdue, the fourth-largest U.S poultry concern, said they believe the Delaware flock got the virus from a neighboring backyard flock being raised for the live market in New York City MICROECONOMICS 14 Dec 11 DEMAND and SUPPLY Asia's problems could be a big break for the U.S poultry industry, which is heavily dependent on foreign sales About 17% of the chicken meat produced in the U.S is exported, a market valued at about $1.5 billion annually The more dangerous form of avian flu sweeping across 10 Asian countries has forced governments there to kill more than 50 million chickens and ducks, yet it is far from clear that the epidemic is ebbing Indeed, the World Health Organization is putting pressure on Asian officials to continue their bird-eradication efforts instead of turning to flu vaccines that might ease the economic blow to their domestic poultry industries The H5N1 strain has so far caused at least 19 human deaths in Thailand and Vietnam The forecast for rising exports, plus the popularity of low-carbohydrate diets in the U.S., had helped to lift U.S chicken prices this winter to their highest level in five years So far, the outbreak in Delaware hasn't prompted any major poultry company to lower its profit outlook In past outbreaks of this type, America's trading partners have narrowed their import bans in a matter of weeks to the states where the disease was present In this case, the biggest foreign customer of U.S poultry, Russia, so far is blocking imports only from Delaware, which produces just 3% of U.S chickens "If things play out as they normally do, I'd characterize this as a bump in the road," said Mike Cockrell, chief financial officer of Sanderson Farms Inc., one of the nation's major chicken processors, based in Laurel, Miss Write to Scott Kilman at scott.kilman@wsj.com MICROECONOMICS 14 Dec 11 DEMAND and SUPPLY SUMMARY: Some U.S poultry companies increased their sales to their customers, which had reduced poultry shipments from their previous Asian suppliers, as these suppliers have to deal with a dangerous type of bird virus However, the appearance of a form of bird flu in Delaware delayed U.S poultry industry’s plans to make profit from the more dangerous type of Asian bird flu The outbreak in Delaware prompted U.S.’s customers to impose bans on U.S poultry, which makes the value of U.S poultry exports fall for at least several weeks The forecast for rising exports, plus the popularity of low-carbohydrate diets in the U.S., had helped to lift U.S chicken prices to their highest level in five years Until now, the outbreak in Delaware hasn't prompted any major poultry company to lower its profit outlook In past outbreaks of this type, America's trading partners have narrowed their import bans to the states where the disease was present Now, the biggest foreign customer of U.S poultry, Russia, is blocking imports only from Delaware MICROECONOMICS 14 Dec 11 DEMAND and SUPPLY ANALYSIS QUESTIONS Is this an article about microeconomics or macroeconomics? Explain why Paragraph two says that Tyson was hoping to increase sales to customers in Japan Is this a shift in supply or a movement along a supply curve? Demonstrate graphically Give an example from the article of a shift in supply Show the effect on price Give one example of a shift in demand and one example of a movement along a demand curve in the article Show the net effect of limiting U.S exports and the bird flu in Asian countries on the demand and supply for U.S chicken sold abroad ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ANSWERS This is a microeconomic issue because it concerns issues facing firms in a particular industry To the extent that the chicken industry is large enough to affect the overall market, it may also be a macroeconomics issue Tyson was facing increased demand (not increased quantity demanded) for its chickens That is, the demand for chickens shifted to the right This increases both equilibrium price and equilibrium quantity as shown in the graph below MICROECONOMICS 14 Price Dec 11 DEMAND and SUPPLY Supply P1 P0 Demand Q0 Q1 Quantity Price An example of a shift in supply is the supply of chicken imported from the United States Those countries who limited the import of U.S chicken because of the problems in Delaware will face a reduced supply of U.S chicken As a consequence, the equilibrium price of imported U.S chicken will rise and equilibrium quantity will fall as shown in the graph below Supply P1 P0 Demand Q1 MICROECONOMICS Q0 Quantity 14 Dec 11 DEMAND and SUPPLY An example of a shift in demand is the increased demand by the Japanese for U.S poultry The demand for U.S poultry shifts to the right An example of a movement along a demand curve is the effect of limiting U.S exports of chicken to Japan The supply of U.S chicken shifts to the left and there is a movement up along the Japanese demand curve for imported U.S chicken Price As the Japanese kill their birds to rid the market of sick poultry, the price of Japanese poultry will rise and they will look elsewhere to buy their poultry This means that the demand for U.S imported chicken will rise (Demand shifts from D0 to D1.) This increases both equilibrium quantity (Q to Q1) and price (P0 to P1) When the U.S found sick chickens in Delaware, the U.S producers killed the chickens and Japanese limited U.S imports The first action shifts the supply of U.S chickens slightly to the left (S0 to S1) and the second action shifts the demand curve to the left (D to D2) The equilibrium price may have risen or fallen, but equilibrium quantity definitely falls from its peak after the initial increase in demand S1 S0 P1 P0 D0 Q0 Q2 Q1 MICROECONOMICS D1 D2 Quantity 14 Dec 11 DEMAND and SUPPLY SOLUTIONS • For Government _ Control the influenza in Delaware closely, not let it spread to other places in the US _ Create favorable conditions for firms and try to make good relationships with other countries as many as possible to open the exports to Asia in particular and to the world in general _ Rise tax on imported chickens, this money will be used to support poultry companies _ Have a policy about decreasing the amount of imported chickens, simultaneously reduce tax on domestic ones to stimulate the demand of people • For firms _ Destroy infected chicken honestly _ Organize selling fresh chickens at a suitable price to gain trust from people, may be begin from who have a low standard of living and then to the higher ones _ This is a great chance for American firms to reinforce the poultry exports to Asian countries while the avian influenza in Asia is getting more complicated _ The forecast for rising exports, plus the popularity of low-carbohydrate diets in the U.S., had helped to lift U.S chicken prices this winter to their highest level in five years This makes the profit outlook of the poultry companies much better _ The appearance of a mild form of avian influenza in Delaware is hobbling the US poultry industry’s plans to export to Asian market while Delaware just produces 3% of US chickens So the US poultry industries in other places can take advantage of this to reinforce their exports  THE END  MICROECONOMICS 14 [...]... macroeconomics issue 2 Tyson was facing increased demand (not increased quantity demanded) for its chickens That is, the demand for chickens shifted to the right This increases both equilibrium price and equilibrium quantity as shown in the graph below MICROECONOMICS 14 Price Dec 11 DEMAND and SUPPLY Supply P1 P0 Demand Q0 Q1 Quantity Price 3 An example of a shift in supply is the supply of chicken imported... because of the problems in Delaware will face a reduced supply of U.S chicken As a consequence, the equilibrium price of imported U.S chicken will rise and equilibrium quantity will fall as shown in the graph below Supply P1 P0 Demand Q1 MICROECONOMICS Q0 Quantity 14 Dec 11 DEMAND and SUPPLY 4 An example of a shift in demand is the increased demand by the Japanese for U.S poultry The demand for U.S poultry... DEMAND and SUPPLY ANALYSIS QUESTIONS 1 Is this an article about microeconomics or macroeconomics? Explain why 2 Paragraph two says that Tyson was hoping to increase sales to customers in Japan Is this a shift in supply or a movement along a supply curve? Demonstrate graphically 3 Give an example from the article of a shift in supply Show the effect on price 4 Give one example of a shift in demand and. .. of a movement along a demand curve in the article 5 Show the net effect of limiting U.S exports and the bird flu in Asian countries on the demand and supply for U.S chicken sold abroad ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ANSWERS 1 This is a microeconomic issue because it concerns issues facing firms in a particular industry To the extent that the chicken industry is large enough... have risen or fallen, but equilibrium quantity definitely falls from its peak after the initial increase in demand S1 S0 P1 P0 D0 Q0 Q2 Q1 MICROECONOMICS D1 D2 Quantity 14 Dec 11 DEMAND and SUPPLY SOLUTIONS • For Government _ Control the influenza in Delaware closely, do not let it spread to other places in the US _ Create favorable conditions for firms and try to make good relationships with other countries... begin from who have a low standard of living and then to the higher ones _ This is a great chance for American firms to reinforce the poultry exports to Asian countries while the avian influenza in Asia is getting more complicated _ The forecast for rising exports, plus the popularity of low-carbohydrate diets in the U.S., had helped to lift U.S chicken prices this winter to their highest level in. .. along a demand curve is the effect of limiting U.S exports of chicken to Japan The supply of U.S chicken shifts to the left and there is a movement up along the Japanese demand curve for imported U.S chicken Price 5 As the Japanese kill their birds to rid the market of sick poultry, the price of Japanese poultry will rise and they will look elsewhere to buy their poultry This means that the demand for... U.S imported chicken will rise (Demand shifts from D0 to D1.) This increases both equilibrium quantity (Q 0 to Q1) and price (P0 to P1) When the U.S found sick chickens in Delaware, the U.S producers killed the chickens and Japanese limited U.S imports The first action shifts the supply of U.S chickens slightly to the left (S0 to S1) and the second action shifts the demand curve to the left (D 1 to D2)... exports to Asia in particular and to the world in general _ Rise tax on imported chickens, this money will be used to support poultry companies _ Have a policy about decreasing the amount of imported chickens, simultaneously reduce tax on domestic ones to stimulate the demand of people • For firms _ Destroy infected chicken honestly _ Organize selling fresh chickens at a suitable price to gain trust from... profit outlook of the poultry companies much better _ The appearance of a mild form of avian influenza in Delaware is hobbling the US poultry industry’s plans to export to Asian market while Delaware just produces 3% of US chickens So the US poultry industries in other places can take advantage of this to reinforce their exports  THE END  MICROECONOMICS 14