demand sfls

Supply and Demand model

Supply and Demand Model

- A Competitive Market

Assumptions:- market with many buyers and many

sellers and perfect information.

To began analyzing the model and to make it work, we assume a few assumptions in place first:

- No monopolies. 没有垄断

Supply and Demand Model

- A Competitive Market

Assumptions:

To began analyzing the model and to make it work, we assume a few assumptions in place first:

- Rational Thinking - People usually exploit opportunities to make themselves better off.

Supply and Demand Model

- A Competitive Market

Assumptions:

To began analyzing the model and to make it work, we assume a few assumptions in place first:

- Rational Thinking

- Ceteris Paribus - A Latin word for – “All else being the same”

在其他条件不变的情况下

Supply and Demand Model

- A Competitive Market

Assumptions:To began analyzing the model and to make it work, we assume a few

assumptions in place first:

- Rational Thinking- Ceteris Paribus It’s important to note, that just

because you want something doesn’t always mean you Demand it.

( Demand is only what we can measure. )

Key point:We will focus on Demand

first

So do you like cake?

Would you like one like

this?

Or would you like one like

this?

I was hoping these pictures would have you think about cake differently.

Why did I show you this?

First you wanted cake... then you didn’t.

But I never talked about prices of cake!!!

- Ceteris Paribus, (all other things staying the same) the relationship between the quantity demanded and the price of a good. 你要多少 , 在一个给定的的价格

Supply and Demand Model

Demand

Do you like Chicken?

Or maybe not like chicken?

- Ceteris Paribus, (all other things staying the same) the relationship between the quantity demanded and the price of a good. 你要多少 , 在一个给定的的价格

Supply and Demand Model

Demand

This idea change is a change in Demand

Would you buy it at this

price?

99 元

127 元 Would you

buy it at this price now?

- The amount of anything that people are willing and able to buy during a specified period at a specified price. 现在购买， 在这个价位

Supply and Demand Model

Quantity Demanded

This change due to price is a change in Quantity

Demanded

- The amount of anything that people are willing and able to buy during a specified period at a specified price. 现在购买， 在这个价位

Supply and Demand Model

Demand

Quantity Demanded

This one is about prices

This one is NOT about

prices

- The amount of anything that people are willing and able to buy during a specified period at a specified price. 现在购买， 在这个价位

Supply and Demand ModelDemand

Quantity Demanded

- Ceteris Paribus, (all other things staying the same) the relationship between the quantity demanded and the price of a good. 你要多少 , 在一个给定的的价格+

=The Law of Demand

Ceteris Paribus, (all other things staying the same) If the price of a good rises, the quantity demanded decreases. If the price of a good falls, the quantity demanded increases

Supply and Demand ModelThe Law of Demand

Ceteris Paribus, (all other things staying the same) If the price of a good rises, the quantity demanded decreases. If the price of a good falls, the quantity demanded increases

This is a movement along the demand curve and does not change where the demand curve is.

Price

Price

Quantity Demanded

Quantity Demanded

788.18.9

10.011.514.2

Price of chicken (per

pound/500kg)

Quantity of chicken demanded (billions of pounds/500kg)

654321

7

Demand Schedule for chicken

DEMAND

70 9 11 1513 17

7

6

5

4

3

2

1

Price of chicken

(per pound)

Quantity of chicken (billions of pounds)

Demand curve, D

A movement along the demand curve is a change in the quantity demanded of a good that is the result of a change in that good’s price.

788.18.9

10.011.514.2

Price of chicken (per

pound/500kg)

Quantity of chicken demanded (billions of pounds/500kg)

654321

7

Demand Schedule for chicken

DEMAND (quantity)

70 9 11 1513 17

7

6

5

4

3

2

1

Price of chicken

(per pound)

Quantity of chicken (billions of pounds)

Demand curve, D

A

B

A movement along the demand curve is a change in the quantity demanded of a good that is the result of a change in that good’s price.

7 8.1 9.70 10 1513 17

$2.00

1.75

1.50

1.25

1.00

0.75

0.50 D1 D2

A C

B

A shift of the demand curve…

… is not the same thing as a movement along the demand curve

Price of chicken

(per 500kg))

Quantity of chicken (billions of

500kg)

Changes (shifts) in DEMAND

Changes in Demand without the price changing

Shift Left

Shift Right

DEMAND (shifts)

This is a shift of the demand curve itself at any given price

= Less Demand at the same price

= More Demand at the same price

An “increase in demand” means a rightward shift of the demand curve: at any given price, consumers demand a larger quantity than before. (D1D2)

Shifts of the Demand Curve

A “decrease in demand”, means a leftward shift of the demand curve: at any given price, consumers demand a smaller quantity than before. (D1D3)

Price

Quantity

D3 D1 D2

Increase in demand

Decrease in demand

Changes (shifts) in DEMAND

(NOT quantity demanded)

1.) Number of Buyers2.) Income

i) Normal goodsii) Inferior goods

3.) Prices of Related Goodsi) Substitutesii) Compliments

a.) Composite Demand

b.) Joint Demand4.) Preferences5.) Expectations

The short answer is: Everything else that is NOT due to a change in price!

5 main reasons:

More people = more Demand at every given priceLess people = less Demand at every given price

Changes (shifts) in DEMAND

1.) Number of Buyers

Demand…

More Demand…

2.) Incomei.) Normal good

Demand increases when income increases

Demand decreases when income decreases

A good for which

and

Changes (shifts) in DEMAND 1.) Number of Buyers

Income Increase

i.) Normal good

Demand increasesBuy more of this at the same price

Income Decrease

Demand decreases Buy less of this at the same price

2.) Incomei.) Normal good

Changes (shifts) in DEMAND 1.) Number of Buyers

ii.) Inferior good

Demand increases when income decreases

A good for which

and

Demand decreases when income increases

Income Increase

Demand decrease Buy less of this at the same price

Income Decrease

Demand increasesBuy more of this at the same price

ii.) Inferior good

2.) Income

Changes (shifts) in DEMAND 1.) Number of Buyers

3.) Prices of Related goodsi.) Substitutes替代

Demand increases, if the price of its substitutes rises.

A good that can be consumed in place of another good.

Demand decreases, if the price of its substitutes falls.

and

Price of this goes up

i.) Substitute

Increase Demand of this

= Buy less of it but more of this =

Price of this goes down

Decrease Demand of this

= Buy more of this but less of this =

2.) Income

Changes (shifts) in DEMAND 1.) Number of Buyers

3.) Prices of Related goodsi.) Substitutes

ii.) Complement 补充 A good that is consumed with another good.

Demand increases, if the price of its complements falls.

and

Demand decreases, if the price of its complements rises.

Price of this goes up Decrease demand of this

= Buy less of it and buy less

of this =

Price of this goes down Increase demand of this

= Buy more of it and buy more

of this =

(the price of this didn’t change)i.) Complement

2.) Income

Changes (shifts) in DEMAND 1.) Number of Buyers

3.) Prices of Related goodsi.) Substitutes

ii.) Complement 补充

- Composite Demand A good of service demanded that has multiple uses.

Ipads can have many

uses

But usually in my house only one use

2.) Income

Changes (shifts) in DEMAND 1.) Number of Buyers

3.) Prices of Related goodsi.) Substitutes

ii.) Complement 补充

- Composite Demand - Joint Demand When two or more goods are

demanded to satisfy the same want.

not substitutes for each other, but are complement each other.

Cars + Gasoline = Let’s go!

2.) Income

Changes (shifts) in DEMAND 1.) Number of Buyers

3.) Prices of Related goods

4.) Preferences 首选项When preferences change, the demand for

one item increases and the demand for another item (or items) decreases.

More people used to smoke because it was

OK

Today preferences

have changed in many places

2.) Income

Changes (shifts) in DEMAND 1.) Number of Buyers

3.) Prices of Related goods4.) Preferences

Expected future income and expected future prices influence demand today.

For example:if the price of a computer is expected to fall next month, the demand for computers today decreases.

5.) Expectations 期望

Expecting rain?

means higher demand for an

umbrellas

Changes (shifts) in DEMAND

(NOT quantity demanded)

1.) Number of Buyers2.) Income

i) Normal goodsii) Inferior goods

3.) Prices of Related Goodsi) Substitutesii) Compliments

a.) Composite Demand

b.) Joint Demand4.) Preferences5.) Expectations

The short answer is: Everything else that is NOT due to a change in price!

5 main reasons:

Individual Demand All of these factors are related to individual demand of stuff.

We want to also look at markets as a whole of many people.

We have seen so far that number of buyers is related to changes in demand.

Supply and Demand Model

Individual Demand

Supply and Demand Model

The sum of the demands of all the buyers in a market.

Add up each person’s Individual Demand = Market Demand

Market Demand

All these reasons discussed are for individual people

++

++

++

=

For the market, just add them all

up!

So to Summarize…

Supply and Demand Model

- A Competitive Market

Assumptions:

To began analyzing the model and to make it work, we assume a few assumptions in place first:

- Rational Thinking

- Ceteris Paribus - A Latin word for – “All else being the same”

在其他条件不变的情况下

- The amount of anything that people are willing and able to buy during a specified period at a specified price. 现在购买， 在这个价位

Supply and Demand ModelDemand

Quantity Demanded

- Ceteris Paribus, (all other things staying the same) the relationship between the quantity demanded and the price of a good. 你要多少 , 在一个给定的的价格+

=The Law of Demand

Ceteris Paribus, (all other things staying the same) If the price of a good rises, the quantity demanded decreases. If the price of a good falls, the quantity demanded increases

Supply and Demand ModelThe Law of Demand

Ceteris Paribus, (all other things staying the same) If the price of a good rises, the quantity demanded decreases. If the price of a good falls, the quantity demanded increases

This is a movement along the demand curve and does not change where the demand curve is.

Price

Price

Quantity Demanded

Quantity Demanded

7 8.1 9.70 10 1513 17

$2.00

1.75

1.50

1.25

1.00

0.75

0.50 D1 D2

A C

B

A shift of the demand curve…

… is not the same thing as a movement along the demand curve

Price of chicken

(per 500kg))

Quantity of chicken (billions of

500kg)

Changes (shifts) in DEMAND

Changes (shifts) in DEMAND

(NOT quantity demanded)

1.) Number of Buyers2.) Income

i) Normal goodsii) Inferior goods

3.) Prices of Related Goodsi) Substitutesii) Compliments

a.) Composite Demand

b.) Joint Demand4.) Preferences5.) Expectations

The short answer is: Everything else that is NOT due to a change in price!

5 main reasons:

The EndThank you