Transcript Document
Demand, Supply and Price (Part 2) I. Increase in Demand P D2 D1 S1 P2 P1 0 NMH\s4econ\dsprev2 Q1 Q2 Q 1 Increase in demand means quantities demanded increase at all prices. P ($) 6 5 4 3 Original Qd 3 4 5 6 New Qd 6 7 8 9 Quantities demanded increase by 3 units at all prices. Be careful: Increase in demand increase in quantity demanded NMH\s4econ\dsprev2 2 P D2 D1 S1 P2 P1 0 Q1 Q2 Q When demand increases, the demand right from D1 to D2. curve will shift to the _____ The equilibrium price will increase _______ from P1 to P 2 and the equilibrium quantity will increase _______ from Q1 to Q2. NMH\s4econ\dsprev2 3 P D4 D3 S1 P3 P4 0 Q4 Q3 Q When demand decreases, the demand left from D3 to D4. curve will shift to the ____ The equilibrium price will ________ decrease from P3 to P4 and the equilibrium quantity will decrease ________ from Q3 to Q4. NMH\s4econ\dsprev2 4 Cause and Effect D D P, Q P, Q P P Qd Qd Shift of the entire demand curve. movement along the same demand curve. It is wrong to say that: Qd P, Q Qd P, Q P D P D NMH\s4econ\dsprev2 5 II. Factors affecting demand 1. Consumers’ income a. Superior goods (normal goods) income demand income demand e.g. PSP, Levi’s jeans... b. Inferior goods income demand income demand e.g. instant noodles, bread... NMH\s4econ\dsprev2 6 II. Factors affecting demand (con’t) 2. Prices of related goods a. Substitutes (competitive demand) e.g. Coca Cola and Pepsi vs P of Coca Cola demand for Pepsi , v.v. b. Complements (joint demand) e.g. digital cameras and storage media P of digital cameras demand for storage media , v.v. NMH\s4econ\dsprev2 7 II. Factors affecting demand (con’t) 3. Number of buyers Immigrants demand for housing No. of elders demand for medical services 4. Demand for resources/factors (derived demand) Demand for housing demand for construction workers and steel NMH\s4econ\dsprev2 8 III. Increase in Supply P S1 D1 S2 P1 P2 0 Q1 Q2 Q When supply increases, the supply curve right from S1 to S2. The will shift to the _____ equilibrium price will decrease ________ from P1 to P2 but the equilibrium quantity will increase from Q1 to Q2. ________ NMH\s4econ\dsprev2 9 IV. Decrease in Supply P S4 D1 S3 P4 P3 0 Q4 Q3 Q When supply decreases, the supply curve left from S3 to S4. The will shift to the ____ equilibrium price will ________ increase from P3 to P4 but the equilibrium quantity will decrease from Q3 to Q4. ________ NMH\s4econ\dsprev2 10 Cause and Effect S S P, Q P, Q P P Qs Qs Shift of the entire supply curve. movement along the same supply curve. It is wrong to say that: Qs P, Q Qs P, Q P S P S NMH\s4econ\dsprev2 11 V. Factors affecting supply 1. Cost of production a. production cost supply ; v.v. b. per-unit tax supply c. per-unit subsidy supply Be careful: S supply curve will shift down (to the right) S supply curve will shift up (to the left) NMH\s4econ\dsprev2 12 V. Factors affecting supply (con’t) 2. Prices of related goods a. Competitive supply e.g. residential flats and cultural amenities P of flats supply of amenities , v.v. b. Joint supply e.g. chicken legs and wings P of chicken legs supply of wings ; v.v. NMH\s4econ\dsprev2 13 V. Factors affecting supply (con’t) 3. Number of sellers Number of firm supply ; v.v. 4. State of technology Technological progress supply PARKnSHOP CYBERSTORE NMH\s4econ\dsprev2 14 VI. Change in Demand and Supply at the same time P D2 D1 P S1 D1 S1 S2 P2 P1 P2 P1 0 Q1 D Q2 Q P, Q 0 S Q1 Q2 Q P, Q Por , Q NMH\s4econ\dsprev2 15 a. increase in demand > increase in supply P D1 D2 S1 S2 P2 P1 0 Q1 Q2 Q P, Q NMH\s4econ\dsprev2 16 b. increase in demand < increase in supply P D1 S1 D2 S2 P1 P2 0 Q1 Q2 Q P, Q NMH\s4econ\dsprev2 17 c. increase in demand = increase in supply P D1 D2 S1 S2 P2= P1 0 Q1 Q2 Q P doesn’t change, Q NMH\s4econ\dsprev2 18 Cause and > D = S < Effect P, Q same P , Q P, Q > D = S < P, Q same P , Q P, Q > D = S < P, Q P, same Q P, Q > D = S < NMH\s4econ\dsprev2 P, Q P, same Q P, Q 19 Demand, Supply and Price (Part 2) The End NMH\s4econ\dsprev2 20