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Understanding Market Adjustments: Impact of Demand and Supply Changes

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orrick
19 diapositives · 383 Views · Aug 14, 2014

This article explores market adjustments resulting from changes in demand and supply, detailing how equilibrium price and quantity are affected. It explains how increases and decreases in demand lead to higher or lower prices and quantities. The discussion includes quantifiable examples using equations and graphical interpretations, outlining clear scenarios for increases and decreases in both demand and supply. Readers will gain insight into the dynamics of market changes and their implications for pricing and availability of goods.

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  1. MARKET ADJUSTMENTS Changes To Demand And Supply

  2. MARKET ADJUSTMENTS • The price of a product remains at the equilibrium point until something changes the demand and/or supply in a market. • Changes in market demand or market supply are not unusual, in fact, most markets have demands and supplies that drift around a bit.

  3. MARKET ADJUSTMENTS • Mostly, these change are ignored. However, large changes in demand or supply cannot be ignore. • It’s possible therefore, to examine the impact on equilibrium price and quantity of an increase or decrease in demand, and an increase or decrease in supply.

  4. AN INCREASE IN DEMAND AS A TABLE

  5. AN INCREASE IN DEMAND AS A GRAPH

  6. AN INCREASE IN DEMAND IN EQUATION FORM Qd = 800 - 100(Price) and Qs = 100(Price)Set: Qd = Qs Substitute: 800 - 100(Price) = 100(Price) Simplify: 800 = 200(Price) Solve: $4 = Price Qd = 800 - 100(Price) Qs = 100(Price) Qd = 800 - 100(4) Qs = 100(4) Qd = 400 Qs = 400

  7. MARKET ADJUSTMENT TO AN INCREASE IN DEMAND • When demand increases a larger quantity is demanded at every price. • The result is an increase in price to $4.00 and an increase in quantity to 400.

  8. A DECREASE IN DEMAND AS A TABLE

  9. A DECREASE IN DEMAND AS A GRAPH

  10. A DECREASE IN DEMAND IN EQUATION FORM Qd = 400 - 100(Price) and Qs = 100(Price)Set: Qd = Qs Substitute: 400 - 100(Price) = 100(Price) Simplify: 400 = 200(Price) Solve: $2 = Price Qd = 400 - 100(Price) Qs = 100(Price) Qd = 400 - 100(2) Qs = 100(2) Qd = 200 Qs = 200

  11. MARKET ADJUSTMENT TO A DECREASE IN DEMAND • When demand decreases a smaller quantity is demanded at every price. • The result is an decrease in price to $2.00 and an decrease in quantity to 200.

  12. AN INCREASE IN SUPPLY AS A TABLE

  13. AN INCREASE IN SUPPLY AS A GRAPH

  14. AN INCREASE IN SUPPLY IN EQUATION FORM Qd = 600 - 100(Price) and Qs = 100(Price) +200 Set: Qd = Qs Substitute: 600-100(Price) = 100(Price)+200 Simplify: 400 = 200(Price) Solve: $2 = Price Qd = 600 - 100(Price) Qs = 100(Price)+200 Qd = 600 - 100(2) Qs = 100(2) + 200 Qd = 400 Qs = 400

  15. MARKET ADJUSTMENT TO AN INCREASE IN SUPPLY • When supply increases a larger quantity is supplied at every price. • The result is a decrease in price to $2.00 and an increase in quantity to 400.

  16. A DECREASE IN SUPPLY AS A TABLE

  17. A DECREASE IN SUPPLY AS A GRAPH

  18. A DECREASE IN SUPPLY IN EQUATION FORM Qd = 600 - 100(Price) and Qs = 100(Price) - 200 Set: Qd = Qs Substitute: 600-100(Price) = 100(Price)-200 Simplify: 800 = 200(Price) Solve: $4 = Price Qd = 600 - 100(Price) Qs = 100(Price)-200 Qd = 600 - 100(4) Qs = 100(4) - 200 Qd = 200 Qs = 200

  19. MARKET ADJUSTMENT TO A DECREASE IN SUPPLY • When supply decreases a smaller quantity is supplied at every price. • The result is an increase in price to $4.00 and a decrease in quantity to 200.