Demand and Supply

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Demand and Supply

• Demand The various amounts of a good which
  people are willing and able to buy at different
  prices when all other relevant things are held
  constant.
• Who wants a yacht?
• Ceteris Paribus
• "with other things the same."
• "all other things being equal."

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Demand Schedule for Corn Demand Schedule for Corn
Price per Bushel Quantity Demanded Per Week
5 10
4 20
3 35
2 55
1 80
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Law of demand

• Quantity demanded of a good or service varies
  inversely with its price.
• Consumers will want to buy more at a lower price
  and less at a higher price.

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What causes the demand for a product to change?

• Price will cause a change in behavior according
  to the law of demand
• A change in price will result in a movement along
  the demand curve
• This is called a change in quantity demanded

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What else can change our demand for a good?

• Everything other than price, will result in a
  change in demand or a shift in demand
• Example
• Mr. Kohn gives Mr. Unwin a raise
• Or
• Mr. Kohn fires Mr. Unwin
• Price has not changed, but other conditions have
  caused me to demand fewer goods

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Mr. Kohn Rocks!
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Recessions are a drag
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Determinants that shift demand

1. The number of consumers
2. A change in the price of a complimentary good

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Determinants that shift demand

1. A change in the price of a substitute
2. A change in consumer income

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Determinants that shift demand

• A change in expectations
• A change in consumer taste
• Advertising
• Popularity
• seasonal effect
• news reports

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Supply

• The amounts of a good or service that sellers
  will offer at various prices when all other
  relevant things are held constant (ceteris
  paribus)

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Supply Schedule for Corn Supply Schedule for Corn
Price per Bushel Quantity Supplied Per Week
5 60
4 50
3 35
2 20
1 5
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Law of Supply

• As prices rise, the quantity supplied rises as
  prices fall, the quantity supplied falls
• Producers want to sell more at higher prices and
  less at lower prices
• Profit per unit of production

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Effect of price on supply

• Changes in price result in a movement along the
  supply curve
• We call this a change in quantity supplied
• Profit per unit of production

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Determinants that shift supply

• Anything, other than price that causes suppliers
  to provide more or less of their product results
  in a
• Change in supply
• Shift in supply
• Profit per unit of production

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Determinants of Supply

1. Number of Suppliers
2. Price of inputs (factors of production)

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Determinants of Supply

• Prices of related goods produced

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Determinants of Supply

• Technology
• Taig CNC Mill
• Expectations

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Determinants of Supply

1. Taxes and Subsidies
2. Government regulation