CH3 study guide - Chapter 3 DEMAND AND SUPPLY Nothing is...

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Unformatted text preview: Chapter 3 DEMAND AND SUPPLY Nothing is more important to the economic survival of any organization than the need to effectively identify and respond to product demand and supply conditions. In economic terms, demand refers to the amount of a product that people are willing and able to buy under a given set of conditions. Need or desire is a necessary component but must be accompanied by financial capability before economic demand is created. Thus, economic demand requires potential buyers with a desire to use or possess something and the financial ability to acquire it. With vibrant demand for its products, the firm is able to attract the necessary resources to expand and grow. Without demand for a firm's products, no revenues are generated to pay suppliers, workers, and stockholders. Without demand, no amount of efficiency in production can ensure the firm's long-term survival. Without demand, the firm simply ceases to exist. Once demand for the firm = s products has been identified or created, the firm must thoroughly understand supply conditions to efficiently meet customer needs. Supply is the amount of a good or service that firms make available for sale under a given set of economic conditions. Just as demand requires a desire to purchase combined with the economic resources to do so, supply requires a desire to sell along with the economic capability to bring a product to market. Supply increases when additional profits are generated; supply decreases when production results in losses. The concepts of demand, supply, and equilibrium described in this chapter provide the fundamentals for analyzing interactions among buyers and sellers in the markets for all goods and services. CHAPTER OUTLINE CIV. BASIS FOR DEMAND A. Direct Demand: Demand for personal goods and services is based on the utility gained through consumption. 1. Demand is the quantity of a good or service that customers are willing and able to purchase during a given period and under a given set of economic conditions. Demand is created when customers perceive value (have desire) and the financial capability to make purchase decisions. 2. The success of any organization depends on a clear understanding of the demand and supply conditions for goods and services provided to customers. B. Derived Demand: Demand for inputs that can be used in production is derived from the demand for consumer goods and services. 30 Chapter 3 21924. Firms demand inputs that can be profitably employed. CV. MARKET DEMAND FUNCTION XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX...
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CH3 study guide - Chapter 3 DEMAND AND SUPPLY Nothing is...

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