supply and demand the basic model of market economics
TRANSCRIPT
SUPPLY and DEMAND
The basic model of market economics
Demand Schedule
Price Quantity
$0.00 12 0.50 10 1.00 8 1.50 6 2.00 4 2.50 2 3.00 0
Demand Curve
$3.002.50
2.001.501.00
0.50
21 3 4 5 6 7 8 9 10
12
11
$/unit
Units/week
单位 / 周0
Price Quantity
$0.00 12 0.50 10 1.00 8 1.50 6 2.00 4 2.50 2 3.00 0
Determinants of Demand Market price
Consumer income
Prices of related goods
Tastes
Expectations
Movements along the demand curve
0
D1
$/unit
units/week
A
C
8
1.00
$2.00
4
Shifts in the demand curve
0
D1
$/unit
units/weekD3
D2
Increase in demand
Decrease in demand
Q2Q1Q3
P
Tilts in the demand curve (change in slope)
0
D1
$/unit
Units /week
D2
Pa
Pb
Qa Qb Qa Qb
The flatter the demand curve, the greater
the change in quantity for a change in price
Supply Schedule
Price Quantity
$0.00 0 0.50 0 1.00 1 1.50 2 2.00 3 2.50 4 3.00 5
Supply Curve
$3.002.502.00
1.501.00
0.50
21 3 4 5 6 7 8 9 10
12
11
$/unit
units/wk
0
Price Quantity
$0.00 0 0.50 0 1.00 1 1.50 2 2.00 3 2.50 4 3.00 5
Determinants of Supply
Market price
Input prices
Technology
Expectations
Number of producers
Movements along the supply curve
1 5
$/unit
(units/wk)0
S
1.00A
C$3.00
Shifts in the Supply Curve
$/unit
units/wk0
SS2
Decrease in Supply
S1
Increase in Supply
Tilts in the Supply Curve
$/unit
units/wk
0
S2
S1
Supply and Demand Together
Price Quantity
$0.00 0 0.50 0 1.00 1 1.50 4 2.00 7 2.50 10 3.00 13
Price Quantity
$0.00 19 0.50 16 1.00 13 1.50 10 2.00 7 2.50 4 3.00 1
Demand Schedule (all buyers)
Supply Schedule (all sellers)
At $2.00, the quantity demanded is equal to the quantity supplied!
Supply
Demand
$/unit
units/wk
Market Equilibrium
21 3 4 5 6 7 8 9 10
12
11
0
$3.002.502.00
1.501.00
0.50
Equilibrium
$/unit
(units/wk)21 3 4 5 6 7 8 9 1
012110
$3.002.50
P*= 2.00
1.501.00
0.50
Supply
Demand
Surplus
Market Not in Equilibrium:P > P* Surplus (Excess Supply)
Equilibrium
Qd Qs
$/unit
(units/wk)21 3 4 5 6 7 8 9 1
012110
$3.002.50
P*= 2.00
1.501.00
0.50
Supply
DemandShortage
Market Not in Equilibrium:P < P* Shortage (Excess Demand)
Equilibrium
QdQs