Chapter 2 The Basics of Supply and Demand
Chapter 2 The Basics of Supply and Demand
Topics to Be Discussed a Supply and Demand ■ The market mechanisn Changes in Market Equilibrium a Elasticities of Supply and Demand a Short-Run Versus Long-Run Elasticities Chapter 2: The Basics of Supply and Demand Slide 2
Chapter 2: The Basics of Supply and Demand Slide 2 Topics to Be Discussed ◼ Supply and Demand ◼ The Market Mechanism ◼ Changes in Market Equilibrium ◼ Elasticities of Supply and Demand ◼ Short-Run Versus Long-Run Elasticities
Topics to Be Discussed a Understanding and Predicting the Effects of Changing Market Conditions a Effects of government Intervention--Price Controls Chapter 2: The Basics of Supply and Demand Slide 3
Chapter 2: The Basics of Supply and Demand Slide 3 Topics to Be Discussed ◼ Understanding and Predicting the Effects of Changing Market Conditions ◼ Effects of Government Intervention--Price Controls
Introduction a Applications of Supply and Demand Analysis o Understanding and predicting how world economic conditions affect market price and production o Analyzing the impact of government price controls, minimum wages, price supports, and production incentives Chapter 2: The Basics of Supply and Demand Slide 4
Chapter 2: The Basics of Supply and Demand Slide 4 Introduction ◼ Applications of Supply and Demand Analysis ⚫ Understanding and predicting how world economic conditions affect market price and production ⚫ Analyzing the impact of government price controls, minimum wages, price supports, and production incentives
Introduction a Applications of Supply and Demand Analysis o Analyzing how taxes, subsidies, and import estriction affect consumers and producers Chapter 2: The Basics of Supply and Demand Slide 5
Chapter 2: The Basics of Supply and Demand Slide 5 Introduction ◼ Applications of Supply and Demand Analysis ⚫ Analyzing how taxes, subsidies, and import restrictions affect consumers and producers
Supply and Demand a The Supply Curve o The supply curve shows how much of a good producers are willing to sell at a given price, holding constant other factors that might affect quantity supplied Chapter 2: The Basics of Supply and Demand Slide 6
Chapter 2: The Basics of Supply and Demand Slide 6 Supply and Demand ◼ The Supply Curve ⚫ The supply curve shows how much of a good producers are willing to sell at a given price, holding constant other factors that might affect quantity supplied
Supply and Demand a The Supply Curve o This price-quantity relationship can be shown by the equation Os=OS(P) Chapter 2: The Basics of Supply and Demand Slide 7
Chapter 2: The Basics of Supply and Demand Slide 7 Supply and Demand ◼ The Supply Curve ⚫ This price-quantity relationship can be shown by the equation: Qs = QS (P)
Supply and Demand The Supply Price (s per unit) Curve Graphically Vertical axis measures price(P) received per unit in dollars Horizontal axis measures quantity(Q)supplied in number of units per time period Quantity Chapter 2: The Basics of Supply and Demand Slide 8
Chapter 2: The Basics of Supply and Demand Slide 8 Horizontal axis measures quantity (Q) supplied in number of units per time period Vertical axis measures price (P) received per unit in dollars Supply and Demand The Supply Curve Graphically Quantity Price ($ per unit)
Supply and Demand The Supply Price (s per unit) S Curve Graphically 2 The supply curve slopes upward demonstrating that at higher prices firms will increase output Quantity Chapter 2: The Basics of Supply and Demand Slide 9
Chapter 2: The Basics of Supply and Demand Slide 9 Supply and Demand S The supply curve slopes upward demonstrating that at higher prices firms will increase output The Supply Curve Graphically Quantity Price ($ per unit) P1 Q1 P2 Q2
Supply and Demand a Non-price Determining Variables of Supply ● Costs of Production ◆ Labor Capital ◆ Raw materials Chapter 2: The Basics of Supply and Demand Slide 10
Chapter 2: The Basics of Supply and Demand Slide 10 Supply and Demand ◼ Non-price Determining Variables of Supply ⚫ Costs of Production ◆Labor ◆Capital ◆Raw Materials