Supply and Demand
Download
Report
Transcript Supply and Demand
Supply and Demand
Demand
Supply
Business and Labor
Demand
Demand
The desire, willingness,
and ability to buy a good
or service you must
WANT a product
Demand schedules
organize the quantity of
a product that someone
is willing to buy at a
range of possible prices
Demand can be shown
using a graphdemand
curve
Demand Schedule
Price
Quantity
$50
0
$40
1
$30
1
$20
2
$10
3
$5
5
Demand
Law of Demand Quantity demanded and
price move in opposite directions (the higher the
price, the lower the demand and vice versa)
Demand
Individual vs. Market Demand
Companies are interested in what everybody wants, not
just one person
Market Demand the total demand of all consumers
Everything we buy has a utility (satisfaction we get
from product)
After a while, we get less and less pleasure from a
product, the more we use it diminishing marginal
utility
This is why a demand curve slopes down- consumers
are unwilling to pay a high price for something that
does not bring as much pleasure
Demand
Factors affecting Demand
When demand goes down, people are willing to buy
fewer items at a certain pricecurve shifts to left
Demand
When demand goes up, people are willing to buy more
of the same item at any given pricecurve shifts to
right
Demand
Factors affecting Demand
1. Changes in number of Consumers more consumers, more
demand
2. Change in consumers’ income more income, more demand
3. Change in consumers’ taste more popular, more demand
4. Change in consumers’ expectationsway ppl. think about
future
5. Change in substitutes demand changes in competing
products change (computers)
6. Changes in complements products that are used together
(DVD and DVD player)
Demand
Elastic vs. Inelastic Demand
Sometimes demand is elastic- demand for a
product responds greatly to a change in price
(Cars)
Demand is inelastic when price changes have
very little effect on the demand for the product
(Medicine)
Supply
What is Supply?
Supply is all the quantities of
goods/services producers are wiling
to sell at all possible prices
opposite of demand
Buyers demand different numbers
of goods based on the selling price
of an item
Law of SupplyAs the price goes
up, the quantity supplied rises, as
the price goes down, the quantity
supplied lowers
Supply can be represented in a
chart and a graph, like demand
Supply Schedule
Price
Quantity
$50
100
$40
90
$30
70
$20
30
$10
10
$5
1
Supply
A supply curve slopes upward suppliers are willing to offer
mores goods/services at a higher price and fewer at a lower price
Businesses hope to make a profit- money received for its
product above the amount spent for cost
Price is the most significant influence on the quantity supplied
Supply
Changes in Supply
Supply increases and decreases depending on certain
factors
When supply goes down, the supply curve moves to the
left
Supply
When supply goes up, the supply curve moves
to the right
Supply
Factors Affecting Supply
Cost of the resource- when cost of the factors
of production go up or down
Productivity- if a business is more efficient, it
will save money and supply will go up
Technology
Change in Government Policy- gov’t makes new
laws/regulations affecting price or productivity,
supply goes up or down
Supply
Elasticity of Supply
A measure of how the quantity of a good
changes in response to a change in price
If quantity changes a lot, product is elastic, if
not, it is inelastic
Business and Labor
Three Types of Businesses
1. Proprietorship- a business owned and operated by a single
person
Pros: Flexibility- you are your own boss
Cons: Financial responsibility unlimited liability;
difficult to raise capital; finding employees
2. Partnership- a business owned by 2 or more ppl.
Pros: Make more money
Cons: Complex legal structure; owners have unlimited
liability (assume all debts)
3. Corporations- Business recognized by the federal
government must have a charter (gov’t permission) to start
corporation, certain number of stocks, stockholders, and a
board of directors
Pros: Easy to find capital; become huge; limited
liability the company, not individual, pays for debts
Cons: Expensive; business owners have little say in running
company
Business and Labor
Labor Unions
Groups of workers who band together to have a better
chance of making more money and better working
conditions
2 types of unions: craft unions(perform the same
skills), industrial unions(work in the same industry)
Closed Unions require you to join if you work for a
particular company; Union shops allow companies to
hire non union people, but they must join once they are
hired
Right-to-work states prevent mandatory union
membership
Business and Labor
Labor unions negotiate in different ways
Collective Bargaining: Co. boss and Union boss
negotiate
Mediation: Bring a 3rd party into talks, give advice
Arbitration: 3rd Party decides disagreement
When negotiations break down, unions use
different techniques
Strike or Boycott management can lockout
employees; court order injunction to prevent strike
Business and Labor
Responsibility of the Business
Consumer- sell quality products that are safe
Owners of the business- reveal financial info
to stockholders (transparency)
Employees- safe workplace, treat workers
without discrimination