Скачать презентацию Chapter 4 Demand Supply and Markets These slides Скачать презентацию Chapter 4 Demand Supply and Markets These slides

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Chapter 4 Demand, Supply and Markets These slides supplement the textbook, but should not Chapter 4 Demand, Supply and Markets These slides supplement the textbook, but should not replace reading the textbook 1

What is a market? A group of buyers and sellers with the potential to What is a market? A group of buyers and sellers with the potential to trade 2

What is demand? A relation showing the quantities of a good consumers are willing What is demand? A relation showing the quantities of a good consumers are willing and able to buy at various prices during a given period of time, other things constant 3

What is a demand curve? A curve showing the quantities of a commodity demanded What is a demand curve? A curve showing the quantities of a commodity demanded at various possible prices, other things constant 4

What is a change in quantity demanded? A movement along the demand curve in What is a change in quantity demanded? A movement along the demand curve in response to a change in the price, other things constant 5

Why do demand curves have a negative slope? At a higher price, consumers will Why do demand curves have a negative slope? At a higher price, consumers will buy fewer units; at a lower price, they will buy more units 6

What does an inverse relationship between price and quantity mean? It means that the What does an inverse relationship between price and quantity mean? It means that the two move in opposite directions 7

What is the law of demand? The quantity of a good demanded is inversely What is the law of demand? The quantity of a good demanded is inversely related to its price, other things constant 8

What is a demand schedule? Shows the specific quantity of a good or service What is a demand schedule? Shows the specific quantity of a good or service that people are willing and able to buy at different prices 9

The Demand Schedule for Milk Quantity demanded Price per quart per Month (millions of The Demand Schedule for Milk Quantity demanded Price per quart per Month (millions of quarts) a $1. 25 8 b 1. 00 14 c 0. 75 20 d 0. 50 26 e 0. 25 32 10

Price per quart The Demand Curve for Milk $1. 25 1. 00 0. 75 Price per quart The Demand Curve for Milk $1. 25 1. 00 0. 75 0. 50 0. 25 0 a b c d e D 8 14 20 26 32 Millions of quarts per month 11

Why do consumers buy more as price decreases and less when price increases? Substitution Why do consumers buy more as price decreases and less when price increases? Substitution effect Income effect 12

What is the substitution effect? When the price of a good falls, consumers will What is the substitution effect? When the price of a good falls, consumers will substitute it for other goods, which are now relatively expensive 13

What is money income? The number of dollars received period of time, such as What is money income? The number of dollars received period of time, such as $100 per week 14

What is real income? Income measured in terms of the goods and services it What is real income? Income measured in terms of the goods and services it can buy 15

What is the income effect? A fall in the price of a good increases What is the income effect? A fall in the price of a good increases consumers’ real income, making them more able to purchase all goods, so the quantity demanded increases 16

What is individual demand? The demand for an individual consumer 17 What is individual demand? The demand for an individual consumer 17

What is market demand? The sum of the individual demands of all consumers in What is market demand? The sum of the individual demands of all consumers in the market 18

What is a normal good? A good for which demand increases as consumer income What is a normal good? A good for which demand increases as consumer income rises 19

What is an inferior good? A good for which demand decreases as consumer income What is an inferior good? A good for which demand decreases as consumer income rises 20

What are complements? Goods that are related in such a way that an increase What are complements? Goods that are related in such a way that an increase in the price of one leads to a decrease in the demand for the other 21

What are substitutes? Goods that are related in such a way that an increase What are substitutes? Goods that are related in such a way that an increase in the price of one leads to an increase in the demand for the other 22

What is a change in demand? A shift in a given demand curve caused What is a change in demand? A shift in a given demand curve caused by a change in one of the nonprice determinants of demand for the good 23

Price per quart An Increase in the Demand for Milk $1. 25 1. 00 Price per quart An Increase in the Demand for Milk $1. 25 1. 00 0. 75 0. 50 0. 25 0 D' D 8 14 20 26 32 Millions of quarts per month 24

IMPORTANT - KNOW THE DIFFERENCE BETWEEN A CHANGE IN THE QUANTITY DEMANDED AND A IMPORTANT - KNOW THE DIFFERENCE BETWEEN A CHANGE IN THE QUANTITY DEMANDED AND A CHANGE IN DEMAND 25

What can cause a change in the demand of a good or service? A What can cause a change in the demand of a good or service? A change in. . . 26

§ Number in the market §Consumer income §Prices of related goods §Consumer expectations §Consumer § Number in the market §Consumer income §Prices of related goods §Consumer expectations §Consumer demographics §Consumer tastes 27

What is supply? A relation showing the quantities of a good producers are willing What is supply? A relation showing the quantities of a good producers are willing and able to sell at various prices during a given time period, other things constant 28

What is a supply curve? A curve showing the quantities of a good supplied What is a supply curve? A curve showing the quantities of a good supplied at various prices, other things constant 29

What is the law of supply? The quantity of a product supplied in a What is the law of supply? The quantity of a product supplied in a given time period is usually directly related to its price, other things constant 30

What is a change in quantity supplied? A movement along the supply curve in What is a change in quantity supplied? A movement along the supply curve in response to a change in the price, other things constant 31

The Supply Schedule for Milk Price per quart $1. 25 1. 00 0. 75 The Supply Schedule for Milk Price per quart $1. 25 1. 00 0. 75 0. 50 0. 25 Quantity supplied per month (millions of quarts) 28 24 20 16 12 32

Price per quart The Supply Curve for Milk $1. 25 1. 00 0. 75 Price per quart The Supply Curve for Milk $1. 25 1. 00 0. 75 0. 50 0. 25 0 S 12 16 20 24 28 Millions of quarts per month 33

What are relevant resources? Resources used to produce the good in question 34 What are relevant resources? Resources used to produce the good in question 34

What are alternative goods? Other goods that use some of the same types of What are alternative goods? Other goods that use some of the same types of resources used to produce the good in question 35

IMPORTANT - KNOW THE DIFFERENCE BETWEEN A CHANGE IN THE QUANTITY SUPPLIED AND A IMPORTANT - KNOW THE DIFFERENCE BETWEEN A CHANGE IN THE QUANTITY SUPPLIED AND A CHANGE IN SUPPLY 36

What is a change in supply? A shift in a given supply curve caused What is a change in supply? A shift in a given supply curve caused by a change in one of the nonprice determinants of the supply of the good 37

What can cause a change in the supply of a good or service? A What can cause a change in the supply of a good or service? A change in. . . 38

§ Technology § Prices of relevant resources § Prices of alternative goods § Producer § Technology § Prices of relevant resources § Prices of alternative goods § Producer expectations § Number of producers 39

What happens when we put demand supply together? Equilibrium 40 What happens when we put demand supply together? Equilibrium 40

What is an equilibrium? An equilibrium is the point toward which the economy tends What is an equilibrium? An equilibrium is the point toward which the economy tends 41

What is disequilibrium? Usually a temporary mismatch between quantity supplied and quantity demanded as What is disequilibrium? Usually a temporary mismatch between quantity supplied and quantity demanded as the market seeks equilibrium 42

What is a surplus? An excess quantity supplied over quantity demanded at a given What is a surplus? An excess quantity supplied over quantity demanded at a given price 43

Why is a surplus a disequilibrium? When there is a surplus the supplier will Why is a surplus a disequilibrium? When there is a surplus the supplier will lower the price to get rid of the surplus 44

What is a shortage? An excess of quantity demanded over quantity supplied at a What is a shortage? An excess of quantity demanded over quantity supplied at a given price 45

Why is a shortage a disequilibrium? When there is a shortage consumers will bid Why is a shortage a disequilibrium? When there is a shortage consumers will bid up the price to determine who gets and who does not get 46

What is market equilibrium? The condition that exists in a market when the plans What is market equilibrium? The condition that exists in a market when the plans of the buyers match the plans of the sellers 47

Equilibrium in the Milk Market Price per quart Panel B: Market Curves $1. 25 Equilibrium in the Milk Market Price per quart Panel B: Market Curves $1. 25 1. 00 0. 75 0. 50 0. 25 0 Surplus Shortage S D 1416 20 24 26 Millions of quarts per month 48

What causes an increase in equilibrium price? An increase in demand or a decrease What causes an increase in equilibrium price? An increase in demand or a decrease in supply 49

Price per quart Effects of an Increase in Demand S $1. 00 0. 75 Price per quart Effects of an Increase in Demand S $1. 00 0. 75 0 D' D 20 24 Millions of quarts per month 50

Price per quart Effects of a Decrease in Supply S’ S 0. 75 0. Price per quart Effects of a Decrease in Supply S’ S 0. 75 0. 50 0 D 20 26 Millions of quarts per month 51

What causes a decrease in equilibrium price? A decrease in demand or an increase What causes a decrease in equilibrium price? A decrease in demand or an increase in supply 52

Price per quart Effects of a Decrease in Demand S $1. 00 0. 75 Price per quart Effects of a Decrease in Demand S $1. 00 0. 75 0 20 24 D D’ Millions of quarts per month 53

Price per quart Effects of an Increase in Supply S S' 0. 75 0. Price per quart Effects of an Increase in Supply S S' 0. 75 0. 50 0 D 20 26 Millions of quarts per month 54

An Increase in Supply and Demand Panel A: Shift in Demand Dominates Price S An Increase in Supply and Demand Panel A: Shift in Demand Dominates Price S S' P' P 0 D' D Q Q' Units period 55

An Increase in Supply and Demand Panel B: Shift in Supply Dominates Price S An Increase in Supply and Demand Panel B: Shift in Supply Dominates Price S P P'' 0 S'' D Q Q'' Units period 56

What is a price floor? A minimum legal price below which a good or What is a price floor? A minimum legal price below which a good or service cannot be sold 57

Wage rate per hour Effects of a Price Floor for Labor (minimum wage) $6. Wage rate per hour Effects of a Price Floor for Labor (minimum wage) $6. 00 0 S Surplus D 14 24 Millions of wage earners 58

What is a price ceiling? A maximum legal price above which a good or What is a price ceiling? A maximum legal price above which a good or service cannot be sold 59

Effects of a Price Ceiling for Rent Price per unit D $400 0 S Effects of a Price Ceiling for Rent Price per unit D $400 0 S Shortage 40 60 Thousands of rental units per month 60

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