Demand and supply for goods and services The micro environment refers to the immediate operational environment including suppliers,competitors,customers,stakeholders and intermediaries. For the organisation as a system,we need to consider the various forces which have an In a free market,the price mechanism signals demand and supply conditions to producers andconsumers It therefore determines the activities of both producers and consumers, influencing the levelsof demand for and the supply of goods substitute and complementary goods economic behaviour of costs in the short and long term 2.基木概念和知识点Basic concepts demand and supply.perfect.competition,oligopoly,monopolistic competition and monopoly 3.问题与应用Questions and applications The position of the demand curve is determined by the demand conditions which include consumers'tastes and preferences,and consumers'incomes Elasticity,in general,refersto the relationship between two variables Priceelasticity demand explainsthe relationship between change in quantity demanded and changes in price. Income elasticity of demand measures the responsiveness of demand to changes in houschold incomeCross elasticity of demand is determined by the availability of substitute (competitors)products. The supply curve shows the quantity of a good which would be supplied by producers at a given price.The competitive market process results inan equilibrium price,which is the price at which marketsupply and market demand quantities are in balance.In any market. will change ifmarket demand or supply conditions change. The price mechanism brings demand and supply into equilibrium,and the equilibrium price for a goodis the price at which the volume demanded by consumers and the volume that firms would be willing tosupply is the same.This is also known as the market clearing price since at this price there will beneither surplusnor shortage in the market. Where maximum prices are imposed,there will be excess demand:rationing may be ,andblack marketeers may seek to operate.Where minimum prices are imposed producers will make excesssupply. (三)思考与实骏Chapter questions and practices (1)Kple is a motor car manufacturer.It may find that if it raises the price itsells its cars for,the demand for the vehicles,and therefore the numberof cars the company sells,will fall.This could be due to the substitution effect.There are a large numberof car manufacturers that customers can choose between.If K raises itsprices it may become more expensive than it rivals,leading customersto switch to lower-priced alternatives.K's sales may also suffer 14 14 Demand and supply for goods and services The micro environment refers to the immediate operational environment including suppliers,competitors, customers, stakeholders and intermediaries. For the organisation as a system, we need to consider the various forces which have an impactinternally and externally. In a free market, the price mechanism signals demand and supply conditions to producers andconsumers. It therefore determines the activities of both producers and consumers, influencing the levelsof demand for and the supply of goods. substitute and complementary goods economic behaviour of costs in the short and long term 2.基本概念和知识点 Basic concepts demand and supply, perfect, competition, oligopoly, monopolistic competition and monopoly 3. 问题与应用 Questions and applications The position of the demand curve is determined by the demand conditions, which include consumers'tastes and preferences, and consumers' incomes. Elasticity, in general, refers to the relationship between two variables. Price elasticity of demand explainsthe relationship between change in quantity demanded and changes in price. Income elasticity of demand measures the responsiveness of demand to changes in household incomeCross elasticity of demand is determined by the availability of substitute (competitors') products. The supply curve shows the quantity of a good which would be supplied by producers at a given price.The competitive market process results in an equilibrium price, which is the price at which marketsupply and market demand quantities are in balance. In any market, the equilibrium price will change ifmarket demand or supply conditions change. The price mechanism brings demand and supply into equilibrium, and the equilibrium price for a goodis the price at which the volume demanded by consumers and the volume that firms would be willing tosupply is the same. This is also known as the market clearing price, since at this price there will beneither surplus nor shortage in the market. Where maximum prices are imposed, there will be excess demand: rationing may be necessary, andblack marketeers may seek to operate. Where minimum prices are imposed, producers will make excesssupply. （三）思考与实践 Chapter questions and practices (1) K plc is a motor car manufacturer. It may find that if it raises the price itsells its cars for, the demand for the vehicles, and therefore the numberof cars the company sells, will fall.This could be due to the substitution effect. There are a large numberof car manufacturers that customers can choose between. If K raises itsprices, it may become more expensive than its rivals, leading customersto switch to lower­priced alternatives.K’s sales may also suffer