Lecture Economics (6/e): Chapter 17 - Stephen L. Slavin

Chapter 17 - Demand, supply, and equilibrium. Learning objectives of this chapter include: Individual and market demand, changes in demand, individual and market supply, changes in supply, graphing supply and demand curves, finding equilibrium price and quantity.

Trang 1

Demand, Supply, and Equilibrium

Trang 5

0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30

6121824

30

Price

Trang 6

0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30

6121824

30

Price

Trang 7

0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30

6121824

30

Price

Trang 8

0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30

6121824

30

Price

Trang 9

6121824

30

Price

Price Venus Martina Serena Lindsay Total

$30 0 1 2 1 4

Trang 10

6121824

30

Price

$30 0 1 2 1 4 $25 2 1 3 3 9

Trang 11

6121824

30

Price

$30 0 1 2 1 4 $25 2 1 3 3 9 $20 3 2 5 4 14

Trang 12

6 12 18 24

30

P r i c e

$30 0 1 2 1 4

$25 2 1 3 3 9

$20 3 2 5 4 14

$15 3 3 6 6 18

Trang 13

6 12 18 24

30

P r i c e

$30 0 1 2 1 4

$25 2 1 3 3 9

$20 3 2 5 4 14

$15 3 3 6 6 18

$10 4 5 7 7 23

Trang 14

6 12 18 24

30

P r i c e

$30 0 1 2 1 4

$25 2 1 3 3 9

$20 3 2 5 4 14

$15 3 3 6 6 18

$10 4 5 7 7 23

$ 5 5 6 7 8 26

Trang 15

6 12 18 24

30

P r i c e

$30 0 1 2 1 4

$25 2 1 3 3 9

$20 3 2 5 4 14

$15 3 3 6 6 18

$10 4 5 7 7 23

$ 5 5 6 7 8 26 Market

Demand

Trang 17

Price QD(1) QD(2)

$30 4 5

$25 9 11

$20 14 18

$15 18 28

$10 23 38

$ 5 26 50

A change in demand would be a change in the schedule

Quantity

30

25

20

15

10

5

Trang 18

Price QD(1) QD(2)

$30 4 5

$25 9 11

$20 14 18

$15 18 28

$10 23 38

$ 5 26 50

An increase in demand is an increase in the quantity people are willing to purchase at all prices

The demand

curve shifts to the

right

Quantity

30

25

20

15

10

5

Trang 19

Price QD(1) QD(2)

$30 4 5

$25 9 11

$20 14 18

$15 18 28

$10 23 38

$ 5 26 50

A decrease in demand means people are willing to purchase less at all prices

The demand

curve shifts to the

left

Quantity

30

25

20

15

10

5

Trang 20

Move from point A to point B A change in quantity demanded

A and B are on the same line, therefore, they are on the same

schedule. If they are on the same schedule, there can be no change

in demand

Trang 21

Move from point A to point B A change in quantity demanded

Movement from A to B is simply a change in quantity

demanded in response to a change in price

Trang 22

E

GI

Move from point F to point G An increase in demand

There is an increase in demand because people are willing to

buy more at all prices on G’s curve which is to the right of F’s curve

H

F

Trang 23

E

GI

Trang 24

E

GI

Move from point H to point I A change in quantity in demanded

As long as we remain on the same curve, there is no change in demand

H

F

Trang 25

L

GJ

Move from point J to point K A change in quantity in demanded

As long as we remain on the same curve, there is no change in demand

N

K

M

Trang 26

L

GJ

Trang 27

L

GJ

Trang 28

L

GJ

Move from point M to point N A change in demand

We don’t know on which of an infinite number of possible

demand curves N is situated, therefore, the most we can say is that there is a change in demand

N

K

M

Trang 30

• The demand for NORMAL goods varies

directly with income

– When income goes up people buy more therefore demand goes up

• The demand for INFERIOR goods varies

inversely with income

– When income goes up people buy less, therefore demand goes down

Trang 31

• Hot dogs and hamburgers; Tuna and salmon

– They can complement the other

• Videos & VCRs; Gasoline & cars, tires

Trang 32

• Directly related

– If the price of hamburgers goes up – The price of hot dogs would also go up

• As the price of hamburgers goes up people will buy less hamburgers and more hot

dogs. This increases the demand for hot dogs . . . thus increasing the price of hot dogs

Trang 33

Hot Dogs

Trang 34

Goods

• Inversely related

– Prices of weenies go up . . . the price of hot dog buns goes down

• The price of weenies goes up . . . people buy less weenies. If people buy less

weenies, they will also buy less hot dog buns

• This decreases the demand for hot dog buns and lowers the price of hotdog buns

Trang 35

D 1

S 1

The price of weenies goes up . . . People buy less weenies. If people buy less weenies, they will also buy less hot dog buns. If people buy less hot dog buns, this decreases the demand for buns and lowers the price

D 2

Hot Dog Buns

Trang 36

– Fewer people are smoking (has been helped

by a campaign to reduce smoking)

Trang 37

• If people expect the price of something to

rise, they rush out to stock up before it does

– This increases the demand

• If people expect the price of something to

fall, they will hold off buying it

– This decreases the demand

Trang 38

• As the nation’s population increases, the

demand for particular goods and services increase

– General growth increases the demand for food, housing, autos, etc

• The changing age distribution affects demand

– Next three decades there will be a higher demand for retirement homes, nursing homes, wheel chairs, bifocal glasses, etc

Trang 39

• Supply is a schedule of quantities of a

good or service that people are willing to sell at various prices

– As prices rise, people are willing to sell more – Thus, there is a positive or direct

relationship between price and quantity

• Price rises . . . quantity supplied rises

• Prices declines . . . quantity supplied declines

Trang 40

Hypothetical supply of American Cars, 2001 (in thousands)

Daimler Japanese Price GM Ford Chrysler Owned Firms Total

$20,000 5311 2356 1245 535 9,447 18,000 4617 1984 991 384 7,976 16,000 4002 1584 762 270 6,618 14,000 3623 1216 601 208 5,648 12,000 3190 996 491 181 4,858

Trang 46

J

M N K

L

Move from J to K An increase in supply

Trang 48

J

M N K

L

Move from L to M A decrease in supply

Trang 50

• The main reason for a change in supply is

changes in the cost of production

– cost of raw materials, labor, capital, insurance, interest, rent, wages, etc.

– when these cost go up . . . supply decreases – this causes the price to increase

Trang 51

• Technological advance

– A technological improvement will increase supply

– Companies are able to produce more at reduced cost cost with an improvement in quality

– A supply increase will cause the price to decline

Trang 54

– Changes in taxes

• The basic effect of taxes is to reduce supply

• The effect of taxes on supply will be covered later in the next chapter

Trang 55

– Expectation of price increases

• Suppliers will hold current production off the market in anticipation of the higher prices

Trang 56

– Expectation of price decreases

• Suppliers will try to sell all they have before the price drops

Trang 57

Supply Curves

Quantity

10 9 8 7

Hypothetical Demand Schedule

Price Quantity Demanded(QD) $10

1 $ 9

2 $ 8

4 $ 7

7 $ 6

12

Trang 58

Supply Curves

Quantity

10 9 8 7 6

S

Hypothetical Supply Schedule

Price Quantity Supplied (QS) $10 14

$ 9 12

$ 8 9

$ 7 5

$ 6 1

Trang 59

Supply Curves

Quantity

10

9

8

7

S

2 4 6 8 10 12 14

Hypothetical Demand and Supply

Schedules

Price QD QS

$10 1 14

$ 9 2 12

$ 8 4 9

$ 7 7 5

$ 6 12 1

The equilibrium point is where the demand and supply curves cross

Trang 60

Supply Curves

Quantity

10

9

8

7

S

2 4 6 8 10 12 14

Hypothetical Demand and Supply

Schedules

Price QD QS

$10 1 14

$ 9 2 12

$ 8 4 9

$ 7 7 5

$ 6 12 1

Equilibrium quantity is 6 Equilibrium price is about $7.20

Trang 63

If we draw our graphs accurately, we can usually find equilibrium price and quantity in a couple of seconds, especially if we’ve used graph paper. But sometime we need to do further analysis to find really accurate equilibrium prices and quantities

Price Quantity Demanded Quantity Supplied

$15 2 19

$14 4 17

$13 7 12

$12 12 6

$11 20 3

Hypothetical Demand and Supply Schedule

How much is the equilibrium price?

Trang 64

Price Quantity Demanded Quantity Supplied

$15 2 19

$14 4 17

$13 7 12

$12 12 6

$11 20 3

First we add a “Units apart” column

Trang 65

Price Quantity Demanded Units Apart Quantity Supplied

$15 2 17 19

$14 4 13 17

$13 7 5 12

$12 12 6 6

$11 20 17 3

Equilibrium price is closer to $13 than to $12

Trang 66

Price Quantity Demanded Units Apart Quantity Supplied

$15 2 17 19

$14 4 13 17

$13 7 5 12

$12 12 6 6

$11 20 17 3

Equilibrium price is a little closer to $13 than to $12

Therefore, equilibrium price has to be something greater than

$12.50 and less than $13

Trang 67

$15 2 17 19

$14 4 13 17

$13 7 5 12

$12 12 6 6

$11 20 17 3

How much is the equilibrium quantity?

Equilibrium quantity demanded is closer to 7 than 12. The midpoint between 12 and 7 is 9.5. Therefore, we know the equilibrium quantity demanded must be

something less than 9.5

Equilibrium quantity supplied is closer to 12 than 6. The midpoint between 12 and 6 is 9. Therefore, we know the equilibrium quantity supplied is something more than 9.0

The equilibrium quantity has to be between 9.0 and 9.5. Anything between 9.1 and 9.4 would be acceptable. I would split the difference and say 9.2 or 9.3

Trang 70

• It isn’t when you’ve got an equilibrium price or

quantity that is clearly closer to one figure than

to another– You will be able to spot this when you draw your graph

• But when the demand and supply curves cross

about halfway between two figures, then you will need to go back to the original schedule to figure out more precisely where the

equilibrium point lies

Định dạng
Số trang	70
Dung lượng	488,43 KB