engineering economics & financial accounting - final year cs/ it third year - sri sairam institute...

7/30/2019 ENGINEERING ECONOMICS & FINANCIAL ACCOUNTING - FINAL YEAR CS/ IT THIRD YEAR - SRI SAIRAM INSTITUTE OF TECHNOLOGY, CHENNAI - Dr.K.BARANIDHARAR

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EngineeringEconomics &

Financial AccountingEe&fa

12 September 2013


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Dr.K.BaranidharanPresent by


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SHIFT IN DEMAND AND SUPPLY

CURVES


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Supply Curve

Quantity

Price

70 9 11 1513 17

$2.00

1.75

1.50

1.25

1.00

0.75

0.50

As price rises, thequantity supplied rises.

A supply curve showsgraphically how much of agood or service peopleare willing to sell at anygiven price.

Supplycurve, S


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An Increase in Supply

A shift of the supply curve is a change in the quantity supplied of a good at anygiven price.

70 9 11 13 15 17

$2.00

1.75

1.50

1.25

1.00

0.75

0.50

S1

S2

Price of coffeebeans (per

pound)

Quantity

is not thesame thing as ashift of thesupply curve

A movementalong the supplycurve


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Movement Along the Supply Curve

A movement along the supply curve is a change in the quantity supplied of agood that is the result of a change in that goods price.

70 10 11.2 12 15 17

$2.00

1.75

1.50

1.25

1.00

0.75

0.50

S1

S2

AC

B

Price

Quantity

is not thesame thing asa shift of thesupply curve

A movementalong the supplycurve


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Any increase insupply means a

rightward shift of thesupply curve: at any

given price, there is anincrease in thequantity supplied.(S1 S2)

Shifts of the Supply Curve

S3

S1

S2

Price

Quantity

Decrease insupply

Increase insupply

Any decrease insupply means a

leftward shift of thesupply curve: at any

given price, there is adecrease in thequantity supplied.(S1 S3)


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SHIFT IN DEMAND AND SUPPLY

CURVES

Change in any of the

variables, other than price,

that influence demand or

supply will result in a shift in

the demand curve or thesupply curve or both.


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A rise in demand(shift in the curve to

the right)

An increase in demand result in shortage of acommodity initially and existing equilibriumcondition is distributed.

Unsatisfied buyers bid up the price andproducers, lured by profitability, increase thesupply.

A new equilibrium will be attained wheremore quantity will be exchanged at a higherprice.


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A fall in demand (shift in the demand

curve to the left)

A degrease in demand

leads to decrease in theequilibrium price as

well as the equilibriumquantity exchanged.


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A rise in supply (shift in the supply

curve to the right)

An increase in supply

results in a decrease in the

equilibrium price and

increase in the equilibriumquantity exchanged.


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Changes in supply can result from events like the following:

Change in production costs.

Improved technology that makes production more efficient.

Industry growth and shrinkage


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(Economics) the economiccondition in which there is neither

excess demand nor excess supplyin a market


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A fall in supply (shift in the supply

curve to the left)

A decrease in supply result

in an increase in the

equilibrium price and

decrease in the equilibrium

quantity exchanged.


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Simultaneous changes in both supply

and demand

There is decrease in the

equilibrium price or an increase

therein and/or a decrease in theequilibrium quantity or an

increase therein depends on theextent of shift in the demand

and supply curves.


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Simultaneous Shifts of Supply and Demand

Two opposing forces

determining theequilibrium quantity.

The increase in

demand dominates thedecrease in supply.

Quantity of coffeeQ2Q

1

P 2

P1

S2

D2

D1

S1

E1

E2

(a) One possible outcome: Price Rises, Quantity Rises

Price of coffee Small decreasein supply

Large increasein demand


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Simultaneous Shifts of Supply and Demand

Two opposing forcesdetermining theequilibrium quantity.

Q1

Q2

P2

P1

S2

D2

D1

S1

E1

E2

(b) Another Possibility Outcome: Price Rises, Quantity Falls

Price of coffee

Quantity of coffee

Largedecreasein supply

Small increasein demand


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Supply, Demand and Equilibrium

Equilibrium in a competitive market: when the quantity

demanded of a good equals the quantity supplied ofthat good.

The price at which this takes place is the equilibrium

price (a.k.a. market-clearing price):

Every buyer finds a seller and vice versa.

The quantity of the good bought and sold at that price is theequilibrium quantity.


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Market equilibriumoccurs at point E,where the supplycurve and the demandcurve intersect.

Price

Quantity

70 10 1513 17

$2.00

1.75

1.50

1.25

1.00

0.75

0.50

Supply

Demand

E EquilibriumEquilibriumprice

Equilibriumquantity

Market Equilibrium

S


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There is a surplus of agood when the quantitysupplied exceeds thequantity demanded.Surpluses occur when

the price is above itsequilibrium level.

70 10 1513 17

$2.00

1.75

1.50

1.25

1.00

0.75

0.50

Supply

Demand

8.1 11.2

E

Surplus

Quantitydemanded

Quantitysupplied

Price

Quantity

Surplus

Sh t


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70 10 1513 17

$2.00

1.75

1.50

1.25

1.00

0.75

0.50

Supply

Demand

9.1 11.5

E

Shortage

Quantitydemanded

Quantitysupplied

Price

Quantity

There is a shortage of a

good when the quantitydemanded exceeds thequantity supplied.Shortages occur when

the price is below itsequilibrium level.

Shortage


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Dr.K.BaranidharanTHANK YOU

engineering economics & financial accounting - final year cs/ it third year - sri sairam institute...

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