supply and demand in economics

7/29/2019 Supply and Demand In Economics

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SUPPLY , DEMAND ANDTHE MARKET PROCESS


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Presented By :

Nilesh Gadge MS1112059

Sachin Methree MS1112072

Vicky Mhatre MS1112074

Neelakshi Kushwaha MS1112070


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Consumer Choice

And The

Law Of Demand


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is the inverse relationship between the

price of a good and the quantityconsumers are willing to purchase.

Market Demand Schedule :

is a table that shows the quantity of agood people will demand at varyingprices.

Law Of Demand :


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Changes In Consumer Income

Change In The Number Of

Consumers Change In The Price Of A

Related Good

Changes In Expectations

Demographic Changes

Changes In Consumer TastesAnd Preferences

The following will lead to a change in

demand :

Demand Curve Shifters


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Producer Choice

And The

Law Of Supply


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Opportunity Costs

Cost AndThe Output

Of

Producers Producers

purchasesresourcesand use

them

EconomicCost

The cost of

all theresources

used toproducegoods

AccountingCost

Often ignores

theopportunitycosts of theresources

owned by the

firm


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The law of supply isreflected by the

shape of the supplycurve.

As the price of agood rises

producers supplymore.

Market Supply Schedule:

Supply120

100

80

40

0 20 30 40 50

Price(monthly bill)

Quantity(millions ofsubscribers)

60

60

70

10

Law of Supply


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140

120

100

80

60

5 10 15 20 25

Market price= $100

Price(monthly bill)

Quantity(millions ofsubscribers)30

Producers are willing tosupply the first 17 millionunits for less than $100.

The area above the supplycurve but below the actualmarket price represents

producer surplus.

Producer surplus representsthe net gains to producers

from market exchange.

Producer

surplus

Supply

Producer Surplus Producer surplus is the

difference between the

lowest price a supplier willaccept to

produce the good and theprice they actually get .


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The following will cause a change in

supply :

Changes In Resource Prices

Changes In Technology

Elements Of Nature And PoliticalDisruptions

Changes In Taxes

Supply Curve Shifters


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7

89

10111213

Excesssupply Downward

Demand And Supply Conditions :

Equilibrium will occur where thequantity demanded equals the quantitysupplied.

With an excess supply present, there will

be downward pressure on price to clearthe market.

Quantity demanded= 450

Quantity supplied= 600

Market Equilibrium

Price(dollars)

Quantity

supplied(per day)

Quantity

demanded(per day)

12 600 450

10 550 550

8 500 650

Conditionin the

market

Directionof pressure

on price

Price ($)

450 500 550 600 650

Quantity

D

S


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7

89

10111213


With market balance present, there

will be an equilibrium present andthe market will clear.

D

S

Market Equilibrium

Price(dollars)

Quantitysupplied(per day)

Quantitydemanded

(per day)

12 600 450

10 550 550

8 500 650

Conditionin the

market


on price

>

Price ($)

450 500 550 600 650

Quantity

< Excessdemand UpwardBalance Equilibrium

Quantity demanded= 550

Quantity supplied= 550


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Excesssupply

Excess

demand

7

89

101112

13


D

SMarket Equilibrium

Price(dollars)

Quantitysupplied(per day)

Quantitydemanded

(per day)

12 600 450

10 550 550

8 500 650

Conditionin the

market


on price

>

Price ($)

450 500 550 600 650

Quantity

< Excessdemand Upward= Balance Equilibrium

Equilibriumprice

Excess Supply

Excess Demand Equilibrium Price


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140

120

100

80

60

5 10 15 20 25

Market price

= $100

Net Gains To Buyers And SellersPrice(monthly bill)


Supply

Demand

Equilibrium

Net gains tobuyers andsellers

Consumer Surplus +

Producer Surplus = NetGains To Buyers AndSellers

When Equilibrium IsPresent, All Of The

Potential Gains FromProduction And ExchangeAre Realized.


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140

120

100

80

60

5 10 15 20 25

Equilibrium and EfficiencyPrice(monthly bill)


Supply

Demand

140

120

100

80

60

5 10 15 20 25

Price(monthly bill)


Supply

Demand


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140

120

100

80

60

5 10 15 20 25

Price(monthly bill)


Supply

Demand

All units valued morethan their costs are

produced and

The potential gains fromproduction and exchange

are maximized.

Outcome is economicallyefficient.

Equilibrium and Efficiency


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The InvisibleHand Principle


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C


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The efficiency of market organization is

dependent upon:The presence of competitive markets.

Well-defined and enforced privateproperty rights.

Conclusion


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supply and demand in economics

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