supply and demand. the market forces of supply and demand usupply and demand are the forces that...
TRANSCRIPT
Supply and Demand
The Market Forces of Supply and Demand
Supply and demand are the forces that make market economies work.
Microeconomics is basically about supply, demand, and market equilibrium.
Teach a parrot to say “supply and demand” and you have an economist
Markets
A market is a group of buyers and sellers of a particular good or service.
The terms supply and demand refer to the behavior of people . . . as they interact with one another in markets.
Markets
Buyers determine demand.
Sellers determine supply.
Demand
Quantity demanded is the amount
of a good that buyers are willing and able
to purchase.
Law of Demand
The law of demand states that there is an inverse
relationship between price and quantity demanded.
Demand Schedule
The demand schedule is a table that shows the relationship
between the price of the good and the quantity demanded.
The demand curve slopes downward because, ceteris paribus, lower prices imply a greater quantity demanded!
An individual’s demand curve represents the marginal utility (additional benefit) received from each incremental unit of the good.
The decreasing satisfaction gained from additional units of a good consumed in a given period is call the law of diminishing marginal utility
Diminishing marginal utility explains the inverse relationship between prices and the quantity demanded in the law of demand
…demand
Mr. Letsos’s Demand Schedule
Price Quantity $0.00 12 0.50 10 1.00 8 1.50 6 2.00 4 2.50 2 3.00 0
Mr. Letsos’s Demand Curve
$3.002.50
2.001.501.00
0.50
2 4 6 8 10 12
Price of Ice-Cream Cone
Quantity of Ice-Cream Cones
0
WHOA!
YES PRICE WILL ALWAYS GO VERTICAL (Y-AXIS) AND
QUANTITY WILL GO HORIZONTAL (X-AXIS)
Mr. Tyllick’s Demand Schedule
Price Quantity $0.00 6 0.50 5 1.00 4 1.50 3 2.00 2 2.50 1 3.00 0
Mr. Tyllick’s Demand Curve
$3.002.50
2.001.501.00
0.50
Price of Ice-Cream Cone
Quantity of Ice-Cream Cones
Total Market Demand Curve
$3.002.50
2.001.501.00
0.50
Price of Ice-Cream Cone
Quantity of Ice-Cream Cones
Not only capitalism here folks
But PC (perfect competition or pure competition)
• More to come on this, but for now:• Many small firms• Same product• No entry/exit costs