Unformatted text preview: Supply and Demand
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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
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
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? 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…
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
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- Fall '08
- Supply And Demand, simple economic model