36. Market Equilibrium Equilibrium Quantity Price S D A Equilibrium Q 1 0 P 1 Quantity Equilibrium Price
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39. Excess Demand Quantity Price S D A Equilibrium 0 Quantity Demanded at the Price P 0 P 1 Equilibrium Price P 0 Quantity Supplied at the Price P 0 Excess Demand (shortage) Price below Equilibrium Price Q s 0 Q d 0
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41. Excess Supply Quantity Price S D 0 P 2 Price above Equilibrium Price P 1 Quantity Demanded at the Price P 2 Excess Supply (surplus) Equilibrium Price Q s 2 Quantity Supplied at the Price P 2 Q d 2 Equilibrium
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43. An Increase in Demand Quantity Price B( New Market Equilibrium ) Q 2 0 P 2 P 1 Q 1 A S 1 D 2 D 1
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45. An Increase in Supply Quantity Price A Q 1 0 P 1 P 2 Q 2 B (New Market Equilibrium) D 1 S 1 S 2
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Notes de l'éditeur
Example: Suppose you want to start a TV repair service -set up shop in neighborhood with many TVs & no repair shops -want to set up business in area where demand is greatest willingness means person’s want or desire to purchase & ability is having enough money to pay for the good (need both for demand!) example: Jack doesn’t have $34,000 to buy a specific car, has the willingness but not the money so there is NO demand
Show math related equation P UP then Qd DOWN or P DOWN then Qd UP
Example: suppose on Mon. buyers bought 100 units of a good at $3 a unit, then on Tues. they bought 150 units of the same good at $3 = the demand increased this is different if the price changed & then they bought more (increase in Qd)
Prices of Related goods – substitutes (apples & oranges, chicken & beef) complements (cars & gas) Preferences: people are beginning to favor small gas-efficient cars so D shifts right while people are favoring other laptops other than Dell recently so their D curve shifts left Complements-Tennis rackets & tennis balls (demand moves in the opposite direction of the price) # of buyers - the more buyers the higher the D, the fewer the buyers the lower the D (higher birthrate, immigration, migration, death rate, or migration)
Elastic ex. – T-Bone steaks are elastic b/c $6 a pound compared to $3.50 a pound is going to cause a huge change in QtD (designer clothing / luxury items) Inelastic – higher or lower price on salt will not change Qtd greatly (ex. Toothpaste) Elastic - when quantity demanded is greater than percentage change in price Inelastic-when quantity demanded is less than percentage than price Unit elastic- when Qd changes by the same % as price
1. Tobacco is inelastic b/c addictive & insulin needed for diabetic no matter what
DMU – as people’s wants for a particular product become more fully satisfied, they become less willing to spend their limited incomes to buy more of that product How does this relate to laws of demand? -more utility you receive from a unit of good, the higher price you are willing to pay for it, however as time moves on individuals obtain less utility from additional units so they only will buy more if really low prices
Supply example: supply of TVs is the number of sets manufacturers are likely to produce at $700, $500, $300, or any other price Supply: economists think about people’s ability & willingness to offer products for sale over a wide range of prices Supplier-offer economic product for sale
Ex. 1 If P falls, the producer may offer less for sale or leave market Ex. 2 If P rises, producer may offer more units for sale to take advantage
Cost of inputs – in T-shirt, supply may have increased because of a decline in the cost of such inputs as cotton or ink = if price of inputs goes down, producer can produce more T-shirts at each and every price Prod. – more T-shirts can be produced in a production period = supply increases, if workers are unhappy/unmotivated, untrained supply decreases Technology- introduce new machine, chemical/industrial process can lower cost of production, so when costs are down producers are willing to produce more at each & every price in the market (supply down if technology breaks down) Subsidies – government payments to individuals, businesses, or other groups to encourage or protect a certain type of economic activity have opposite effect & supply increases (ex. Farmers historically receive subsidies to offset costs of production)
Government Regulations ex. Government mandates safety features to automobiles like emission controls, stronger bumpers, & air bags which increases production cost of car
Cost of inputs – in T-shirt, supply may have increased because of a decline in the cost of such inputs as cotton or ink = if price of inputs goes down, producer can produce more T-shirts at each and every price Prod. – more T-shirts can be produced in a production period = supply increases, if workers are unhappy/unmotivated, untrained supply decreases Technology- introduce new machine, chemical/industrial process can lower cost of production, so when costs are down producers are willing to produce more at each & every price in the market (supply down if technology breaks down) Subsidies – government payments to individuals, businesses, or other groups to encourage or protect a certain type of economic activity have opposite effect & supply increases (ex. Farmers historically receive subsidies to offset costs of production)
Government Regulations ex. Government mandates safety features to automobiles like emission controls, stronger bumpers, & air bags which increases production cost of car Natural Disaster/Crisis – somolian pirates slowing African shipping
Elastic – kites & candy because not much needed to increase production (therefore if prices rise they can increase output quickly) Inelastic – oil (need lots of machinery, capital, labor to increase production so it is inelastic)
Qs – Qd is formula for finding shortage & surplus (if negative then shortage, if positive then surplus, if 0 then equilibrium)
Shortage in real world – have a playoff high school football game that stadium seats 2,000 people but 2,500 people want to come to game (shortage) Price rises b/c buyers will offer to buy products at higher prices so they get the products, higher pices will also motivate sellers to produce more output
Surplus in real world – high school football playoff has stadium for 2,000 seats but only 500 people attend (surplus of seats) Price falls because suppliers cannot sell all of their products & want to get rid of inventories (storing extra goods is costly) & produce less output
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