Supply and Demand

Supply and Demand - Supply and Demand Produced by J.R....

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Unformatted text preview: Supply and Demand Produced by J.R. Table of Contents Table Overview of Supply and Demand Demand, its definitions and subspecies Supply, what it is and yada yada… Subsidies So What Is S and D? So A simple economic model based on the idea that people act out of their own self­ interest First introduced by Alfred Marshall in Principles of Economics, published in 1890 Not written of by the brilliant economists Smith, Mills or Malthius What is Demand? The amount of good that people (or consumers) are willing and/or able to buy (or consume) What is Utility? Utility = How much satisfaction a consumer gets from consuming, using or abusing a good or service Utility declines the more there is of something What Influences Demand? What The price of the good The consumer’s income If people want/like the goods Fashion Amount of substitutes (copies of good) Demand for goods used at the same time The “Sheep” effect, celebrities, friends etc are wearing/buying/using etc the good What Makes A Demand Curve Change? Change? Price never shifts a demand curve A fall in quantity, as in Q1 – Q2 can be called a “contraction in demand.” Where a Curve can Shift Where A demand curve can shift if there is a change in its customers. If there is a change in income, taste, fashion or etc then… The Curve Shifts What is Supply? The amount of a good that vendors are willing and/or able to sell at any given price What Influences Supply? What The price of the good The amount of “competitive goods” or look­alike products The cost of making the good The amount being produced Unforeseen events (earthquakes, strikes, another gold rush…) Looking at Supply Curves Looking Changes in price never shift the supply curve Increase in quantity from Q1­Q2 is called an expansion in supply Supply Curves Shift Only… Supply If there is: A change in costs A change in the number of goods An unforeseen event (earthquake…) Increase in supply shifts curve to right Putting the Curves Together Putting The Area in­between the two curves around where the P and Q lines collide is the equilibrium. If the price is too high (well above equilibrium) then there is excess supply If the price is too low (well below equilibrium) then there is excess demand Excess supply drives prices down, excess demand drives prices up Subsidies Subsidies A subsidy, free money given by the government to an industry, makes the industry want to produce more of a good. Thus pushing down the supply curve. Prices falls by less than subsidy, industry keeps money Conclusion Conclusion Supply and Demand is a simple economic model that just makes sense when looking at human nature The goods that there are the least of are usually the most valuable Once there becomes a lot of something then the price usually moves down Don’t sweat it, just think baseball cards If you want the exact link to learn more, or review go to: more, http://www.bized.ac.uk/stafsup/opti http://www.bized.ac.uk/stafsup/opti ons/notes/econ207.htm#Heading80 ...
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This note was uploaded on 11/27/2011 for the course HISTORY 103 taught by Professor Livingston during the Fall '08 term at Rutgers.

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