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economics mba 1st sem, Lecture notes of Economics

Christ UniversityEconomics

Economics notes for mba first semester students studying in india. very usefull notes.

Typology: Lecture notes

2020/2021

Uploaded on 04/12/2021

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PowerPoint Slides prepared by:
Andreea CHIRITESCU
Eastern Illinois University
4
The Market Forces of Supply and Demand
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© 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
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Download economics mba 1st sem and more Lecture notes Economics in PDF only on Docsity!

PowerPoint Slides prepared by: Andreea CHIRITESCU Eastern Illinois University

The Market Forces of Supply and Demand

© 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as 1

Markets and Competition, Part 1

  • (^) Supply and demand
    • (^) Words economists use most often
    • (^) The forces that make market economies work
    • (^) Refer to the behavior of people as they interact with one another in competitive markets © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as 2

Markets and Competition, Part 3

  • (^) Markets take many forms

    • (^) Highly organized

      Markets for many agricultural commodities

    • (^) Less organized

      Market for ice cream in a particular town

© 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as 4

Markets and Competition, Part 4

  • (^) Competitive market
    • (^) Market in which there are many buyers and many sellers
    • (^) Each has a negligible impact on market price
    • (^) Price and quantity are determined by all buyers and sellers - (^) As they interact in the marketplace © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as 5

Markets and Competition, Part 6

  • (^) Monopoly
    • (^) The only seller in the market
    • (^) Sets the price

Other markets

  • (^) Between perfect competition and monopoly © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as 7

Demand, Part 1

  • (^) Quantity demanded
    • (^) Amount of a good that buyers are willing and able to purchase
  • (^) Law of demand
    • (^) Other things equal
    • (^) When the price of a good rises, the quantity demanded of the good falls
    • (^) When the price falls, the quantity demanded rises © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as 8

Figure 1

Catherine’s Demand Schedule and Demand Curve Price of Ice- Cream Cone Quantity of Cones Demanded $0.00 12 cones 0.50 10 1.00 8 1.50 6 2.00 4 2.50 2 3.00 0 The demand schedule is a table that shows the quantity demanded at each price. The demand curve, which graphs the demand schedule, illustrates how the quantity demanded of the good changes as its price varies. Because a lower price increases the quantity demanded, the demand curve slopes downward. © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as 10

Demand, Part 3

  • (^) Market demand
    • (^) Sum of all individual demands for a good or service
  • (^) Market demand curve
    • (^) Sum the individual demand curves horizontally
    • (^) Total quantity demanded of a good varies
      • (^) As the price of the good varies
      • Other things constant © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as 11

Figure 2, Part 2

Market Demand as the Sum of Individual Demands © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as 13

Demand, Part 4

  • (^) Shifts in the demand curve

    • (^) Increase in demand

      Any change that increases the quantity demanded at every price
      • (^) Demand curve shifts right
    • (^) Decrease in demand
      • (^) Any change that decreases the quantity demanded at every price
      • (^) Demand curve shifts left © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as 14

Demand, Part 5

  • (^) Variables that can shift the demand curve
    • (^) Income
    • (^) Prices of related goods
    • (^) Tastes
    • (^) Expectations
    • (^) Number of buyers © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as 16

Demand, Part 6

  • (^) Income

    • (^) Normal good

      Other things constant
      • (^) An increase in income leads to an increase in demand
    • (^) Inferior good
      • (^) Other things constant
      • An increase in income leads to a decrease in demand © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as 17

Demand, Part 8

  • (^) Tastes
    • (^) Change in tastes: changes the demand

Expectations about the future

  • (^) Expect an increase in income
    • (^) Increase in current demand
  • (^) Expect higher prices
    • (^) Increase in current demand
  • (^) Number of buyers, increases
  • (^) Market demand increases © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as 19

Table 1

Variables That Influence Buyers Variable A change in this variable… Price of the good itself Represents a movement along the demand curve Income Shifts the demand curve Prices of related goods Shifts the demand curve Tastes Shifts the demand curve Expectations Shifts the demand curve Number of buyers Shifts the demand curve This table lists the variables that affect how much consumers choose to buy of any good. Notice the special role that the price of the good plays: A change in the good’s price represents a movement along the demand curve, whereas a change in one of the other variables shifts the demand curve. © 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as 20