Understanding Market Dynamics: Demand, Supply, and Equilibrium Concepts
Dive into the essential concepts of demand and supply with detailed graphs and explanations. This guide covers the fundamentals of price elasticity, perfectly inelastic and elastic demand, shifts in demand and supply, determining equilibrium points, price ceilings, and floors. Understand consumer and producer surplus and explore the effects of changes in income and production costs on market dynamics. Key concepts are clearly defined and illustrated for easier comprehension, making it an indispensable resource for students of economics.
Understanding Market Dynamics: Demand, Supply, and Equilibrium Concepts
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Presentation Transcript
MID Year Graphs You should know and be able to draw, explain and label all parts.
Basic S&D ideas Price Demand Quantity
Basic S&D ideas Price Elastic Demand is more flat and Greater than 1 Quantity
Basic S&D ideas Price Inelastic Demand is a steep Line = less than 1 Quantity
Basic S&D ideas Price Perfectly Inelastic Demand Quantity
Basic S&D ideas Price Perfectly elastic Demand Quantity
Basic S&D ideas Price B Change in demand A Demand Quantity
Basic S&D ideas Price Supply Quantity
Basic S&D ideas Inelastic Supply is steep Price Quantity
Basic S&D ideas Price Elastic Supply is flatter Quantity
Basic S&D ideas Price Perfectly inelastic Supply Quantity
Basic S&D ideas Price Perfectly elastic Supply Quantity
Basic S&D ideas Price Supply Change in supply B A Quantity
Basic S&D ideas Price S Equilibrium – market clearing point D Quantity
Basic S&D ideas Price S Price Ceiling Equilibrium – market clearing point D Quantity
Basic S&D ideas Price S Equilibrium – market clearing point Price Floor D Quantity
Basic S&D ideas Price S Shift in demand - determinants E D2 D Quantity
Basic S&D ideas Price Shift in supply - determinants S S2 E D Quantity
Basic S&D ideas Double Shift: Shift in supply and demand Increase in income and lowering of costs of production Price S S2 E D2 D Quantity
Surplus – Consumer and Supplier CS = above equilibrium price below the demand curve PS = below the equilibrium price and above the supply curve Price S TS = CS+PS CS PS Equilibrium – market clearing point D Quantity
Changing CS and PS Price S D Quantity
Changing CS and PS A recession cuts income Price S A B C D E2 D D2 Quantity
Externality – Negative (-) Social Cost Price S2 • O – social cost of pollution • 3rd parties wishes S – Private Cost O E D – Private Value Quantity
Positive externality (+) O= positive of education 3rd parties benefits Price S – Private Cost O = benefit to society D2- Social Value D Private Values Quantity
