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1、,Lecture 2,Market Supply and Demand,Lecture 2,Slide 2,Topics to Be Discussed,Supply and Demand The Market Mechanism Changes in Market Equilibrium Elasticities of Supply and Demand Short-Run Versus Long-Run Elasticities,Lecture 2,Slide 3,Topics to Be Discussed,Understanding and Predicting the Effects
2、 of Changing Market Conditions Effects of Government Intervention-Price Controls,Lecture 2,Slide 4,Introduction,Applications of Supply and Demand Analysis Understanding and predicting how world economic conditions affect market price and production Analyzing the impact of government price controls,
3、minimum wages, price supports, and production incentives Analyzing how taxes, subsidies, and import restrictions affect consumers and producers,Lecture 2,Slide 5,Wants,Maslow Law: A person has wants.,Self actualization,Esteem,Social,Safety,Physiological,Lecture 2,Slide 6,Supply and Demand,Demand is
4、a general term describing the behavior of buyers and potential buyers of a good. The quantity demanded of a good is the amount that buyers are willing to buy in some period(day or year, for example). Quantity demanded depends on the price of the good and on other factors, including the price of othe
5、r goods and buyers incomes and tastes. Demand=willing to buy +able to pay for the quantity demanded Distinguish between quantity demanded and quantity actually bought.,Lecture 2,Slide 7,Qd: Quantity demanded; P: Commodity price Pr: Relevant Commodity price; Pe: Commodity expected future price; I: Co
6、nsumer income; F: Consumer preference; T: Time,Supply and Demand,Demand function:,Lecture 2,Slide 8,Supply and Demand,The demand schedule is the relationship between the quantity of good demanded and the price of that good. Other factors that may affect the quantity demanded, such as the prices of o
7、ther goods, are held constant in drawing up the demand schedule. law of demand The demand cure shows graphically the quantity of a good demanded at each price, with other factors that affect quantity demanded held constant. The demand curve is typically downward-sloping.,Lecture 2,Slide 9,Supply and
8、 Demand,Quantity,Price ($ per unit),Lecture 2,Slide 10,Supply and Demand,Quantity,Price ($ per unit),Lecture 2,Slide 11,Supply and Demand,Non-price Determining Variables of Demand Income Consumer Tastes Price of Related Goods Substitutes Complements,Lecture 2,Slide 12,P,Q,Change in Demand,Supply and
9、 Demand,Income Increases At P1, produce Q2 At P2, produce Q1 Demand Curve shifts right More purchased at any price on D than on D,Lecture 2,Slide 13,Shifts in Supply and Demand,Demand - A Review Demand is determined by non-price demand-determining variables, such as, income, price of related goods,
10、and tastes. Changes in demand are shown by shifting the entire demand curve. Changes in quantity demanded are shown by movements along the demand curve.,Lecture 2,Slide 14,Supply and Demand,The quantity supplied of a good is the amount sellers are willing to sell in some period (day or year, for exa
11、mple). Quantity supplied depends on the price of good and on other factors, primarily the prices of the inputs used in production and the techniques of production available to sellers. Supply=willing to sell + able to deliver the quantity supplied,Lecture 2,Slide 15,Supply and Demand,Qs: Quantity su
12、pplied; P: Commodity price Pr: Relevant Commodity price; Pe: Commodity expected future price; C: Production costs; N: Natural condition; T: Time,Supply function:,Lecture 2,Slide 16,Supply and Demand,The supply schedule is the relationship between the quantity of a good supplied and its price. Other
13、factors that may affect the quantity supplied, such as the prices of inputs and available production techniques, are held constant in drawing up the supply schedule. The supply curve shows graphically the quantity of good at each price, with which other factors that affect quantity supplied held con
14、stant. The supply curve is typically upward-sloping.,Supply Law,Lecture 2,Slide 17,Supply and Demand,The Supply Curve Graphically,Quantity,Price ($ per unit),Lecture 2,Slide 18,Supply and Demand,The Supply Curve Graphically,Quantity,Price ($ per unit),Lecture 2,Slide 19,Supply and Demand,Non-price D
15、etermining Variables of Supply Costs of Production Labor Capital Raw Materials,Lecture 2,Slide 20,Supply and Demand,The cost of raw materials falls At P1, produce Q2 At P2, produce Q1 Supply curve shifts right to S More produced at any price on S than on S,P,Change in Supply,Q,Lecture 2,Slide 21,Sup
16、ply and Demand,Supply - A Review Supply is determined by non-price supply-determining variables as such as the cost of labor, capital, and raw materials. Changes in supply are shown by shifting the entire supply curve.,Lecture 2,Slide 22,Supply and Demand,Supply - A Review Changes in quantity supplied are shown by movements along the supply curve and are caused by a change in the price of the product.,Lecture 2,Slide 23,The M
