Demand and Supply

1
Demand and Supply

• The Behavior of Consumers
• and Producers

2
Demand

• What determines Demand?
• A Demand Function
• QD f (P,I,Po,T,E,X)
• What are these arguments or variables?
• Why do we focus on price?
• The Law of Demand
• Demand Curves

3
Demand Curves
Price per unit
D
Quantity
4
Demand Curves

• Movements along a demand curve
• Changes in Quantity Demanded
• Shifts in demand curves
• Changes in Demand
• What causes a shift?
• Changes in parameters
• The Ceteris Paribus Assumption

5
Demand Curves Movements along a curve
Price per unit
P1
P2
D
Quantity
6
Demand Curves Changes in Demand
Price per unit
D
D
Quantity
7
Shifts of Demand Curves

• What causes these shifts to occur?
• What do they indicate?
• How does this relate to the demand function?

8
Supply

• What determines supply?
• A Supply Function
• Qs f(P,Pi,R,E,Y)
• What are these variables?
• A Supply Curve
• The Law of Supply

9
The Supply Curve
Price per unit
S
Quantity
10
Supply Curves

• Movements along a supply curve
• Changes in Quantity Supplied
• Shifts in a supply curve
• Changes in Supply
• What causes a shift?
• Ceteris Paribus

11
Market Equilibrium

• What is equilibrium?
• What characterizes an equilibrium?
• What about Ceteris Paribus?

12
Market Equilibrium
Price
S
Peq
D
Qeq
Quantity
13
Some Examples

• The art market an auction
• The market for football tickets
• The coffee market

14
The Market for Tapes
Supply
Demand
15
Changes in the Market for Tapes
Demand (P1)
Demand (P2)
Supply
16
The Market for Football Tickets
Price
Quantity
17
The Coffee Market
Price
Quantity