1 / 17

SUPPLY AND DEMAND

SUPPLY AND DEMAND. HOW DOES A MARKET ECONOMY REQUIRE THESE FORCES TO WORK, AND WORK WELL?. RE-CAP. IN A MARKET ECONOMY: COMAPNIES/BUSINESSES PRODUCE GOODS OR SERVICES COMPANIES/BUSINESSES WANT PROFITS CONSUMERS WANT GOODS OR SERVICES

zena
Télécharger la présentation

SUPPLY AND DEMAND

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. SUPPLY AND DEMAND HOW DOES A MARKET ECONOMY REQUIRE THESE FORCES TO WORK, AND WORK WELL?

  2. RE-CAP • IN A MARKET ECONOMY: • COMAPNIES/BUSINESSES PRODUCE GOODS OR SERVICES • COMPANIES/BUSINESSES WANT PROFITS • CONSUMERS WANT GOODS OR SERVICES • COMPANIES/BUSINESSES COMPETE TO GIVE CONSUMERS WHAT THEY WANT • CONSUMERS WANT TO GET A “BARGAIN” • FREE MARKET ALLOWS FOR COMPETITION AND PRODUCTION OF GOODS DEMANDED BY THE CONSUMERS • REGULATIONS ARE FEW SINCE “LAISSEZ-FAIRE” IS OBSERVED

  3. WHAT IS DEMAND? • THE DESIRE TO PURCHASE SOMETHING AT A SPECIFIED PRICE AND TIME ACCOMPANIED BY THE ABILITY AND WILLINGNESS TO PAY • DEMAND AND WANT ARE NOT THE SAME THING • YOU MAY WANT A NEW CAR BUT…. • YOU DEMAND IT ONLY WHEN YOU CAN ACTUALLY BUY IT

  4. DEMAND • JOE HAS A CAR WHICH REQUIRES GASOLINE • GAS PRICES ARE AS FOLLOWS: PRICE PER GALLON GALLONS PER WEEK $3.00 5 $2.50 10 $2.00 15 $1.50 20 $1.00 25 $.50 30

  5. GAS DEMAND/DEMAND CURVE

  6. WHAT HAPPENED? • PEOPLE BUY LESS OF SOMETHING AT HIGHER PRICES THAN THEY DO AT LOWER PRICES • THIS IS CALLED……PRICE EFFECT or LAW of DEMAND

  7. PRICE ELASTICITY OF DEMAND • Also known as : ELASTICITY • or – ELASTICITY OF DEMAND

  8. WHAT IS THIS? • IF WE NEED IT, WE BUY IT • IF THE PRICE IS LOW AND WE NEED IT, WE BUY LOTS OF IT • IF THE PRICE CHANGES – EVEN UP TO 200% AND WE NEED IT, WE STILL BUY IT….. • WHAT IF WE DON’T NEED IT – WE JUST WANT IT?

  9. H2O SCENARIO AT THE MALL • IN THE MALL I’M THIRSTY – I NEED…. WATER • I’M EXPECTING TO PAY = $1.00 BUT THE WATER = $2.00 WILL I BUY THE WATER? Yes I will – WHY?

  10. T-SHIRT SCENARIO AT THE MALL • H&M – STORE FOR FAIRLY INEXPENSIVE YET TRENDY STUFF HAS T-SHIRTS FOR SALE • I EXPECT TO PAY $10 FOR A T-SHIRT THERE • BUT THE T-SHIRT IS ACTUALLY $15 WILL I BUY THE T-SHIRT? NO I WON’T– WHY NOT?

  11. ELASTIC vs. INELASTIC WANTS: LUXURY GOODS NEEDS: NECESSITIES • LESS LIKELY TO BUY THESE GOODS IF THE PRICE IS HIGH • BUT IF PRICE DROPS….MAYBE WE’LL BUY • WILL BUY THESE GOODS EVEN IF PRICE CHANGES – BECAUSE WE NEED THEM!

  12. FACTORS OF ELASTICITY UNLESS THERE ARE SUBSTITUTES for particular goods or services, we identify goods as ELASTIC or INELASTIC WHEN a GOOD or SERVICE has no SUBSTITUTE – it becomes INELASTIC

  13. ANOTHER WAY TO LOOK AT IT: • CONSIDER ELASTIC AS A CHANGE YOU ARE RESPONSIVE TO • CONSIDER INELASTIC AS A CHANGE YOU ARE IRRESPONSIVE TO

  14. SUPPLY in all of this….. • PRICE IS CHANGED BY DEMAND – • PRICE DOES NOT CHANGE SUPPLY – SUPPLY CHANGES PRICE

  15. BOOK SCENARIO • THERE IS AN ECONOMICS BOOK WITH ALL THE ANSWERS TO YOUR FRIDAY QUIZZES • I ONLY HAVE ONE COPY – MY SUPPLY IS LOW • HOW MUCH WOULD YOU PAY FOR THE BOOK? • MS. GOOD COMES IN WITH 100 OF THESE BOOKS – HOW MUCH WOULD YOU PAY FOR THE BOOK? • WHAT CHANGES????

  16. WHERE SUPPLY AND DEMAND COLLIDE…. • WHEN SUPPLY AND DEMAND INTERSECT – WE HAVE MARKET EQUILIBRIUM ALSO KNOWN AS “THE IDEAL PRICE”

  17. REAL WORLD ECO…. • OPEC – ORGANIZATION FOR PETROLEUM EXPORTING COUNTRIES RESTRICTS THE SUPPLY OF OIL TO ALLOW THE PRICE TO GO UP

More Related