chapter 1 demand and supply

8/12/2019 Chapter 1 Demand and Supply

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CHAPTER 1

DEMAND SUPPLY

AND EQUILIBRIUM

HUNH VN [email protected]

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Demand

I.DEMAND:

Wants, Need, Wish,

Ability to Pay Demand, D

Quantity demanded, Qd

Price, P


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Demand

Demand Schedule


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P ($/Kg) Q (Kg)

0 18

1 15

2 12

3 9

4 6

5 3

6 0


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Demand

Demand Curve

The law of negatively slope demand

P($/Kg)

Q (Kg)

D


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Demand

Demand function

Q=a + bP, b


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Demand

Change in the quantity demanded

A movement along a given demand curve for a

commodity as a result of a change in its price

Change in the demand

A shift in the entire demand curve of a

commodity resulting from a change in theindividuals money income or taste, or price ofother commodities.


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Demand

Demand for X increasePx constant, Qdx

increase or Qdx constant, Px increase or the

demand curve shift to the right.

Demand for X increase by:

+Change in the price of Y (Py)

Py increase when X and Y: SubstitutegoodsPy decrease when X and Y: Complementgoods


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Demand

+Change in the Income (I)

I increase when X : Normalgoods

I decrease when X: Inferiorgoods+Change in the Taste (T)

Consistent taste =>Demand increase

Inconsistent taste =>Demand decrease


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Demand

The individuals demand for a commodity andthe market demand for a commodity

Individuals demand (One Person)

Q=a + bP, b


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Demand

Mr. A have the demand function for X:

Q=10-2P or P=5-(1/2)Q

The market demand function for X with 10people the same Mr. A have:

Q=10*(10-2P) or P=5-((1/2)/10)Q


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Demand

Change in Demand Curve

D1=>D2:Demand increase; D2=>D1: Demand decrease

P($/Kg)

Q (Kg)

D1

D2


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SUPPLY

II. SUPPLY, S:

Wants, Need

Ability to produceSupply, S

Quantity Supplied, Qs


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Supply

Supply Schedule


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P ($/Kg) Q (Kg)

0 0

1 32 6

3 9

4 12

5 15

6 18


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Supply

Supply Curve

P

($/Kg)

Q (Kg)

S


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Supply

Supply function

Q=a + bP, b>0

P=c + dQ, d>0


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Supply

Change in the quantity Supplied

A movement along a given supply curve for a

commodity as a result of a change in its price

Change in the Supply

A shift in the entire supply curve of a commodity

resulting from a change in technology, the prices

of the inputs necessary to produce the

commodity, and climate and weather condition.


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Supply

Supply for X increasePx constant, Qsx

increase or Qsx constant, Px decrease or the

supply curve shift to the right.

Supply for X increase by:

+Technology Progress

+The price of inputs: Decrease

+Climate, Weather: Favorable


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Supply

A Company have the Supply function for X:

Q=100-2P or P=50-(1/2)Q

The market supply function for X with 10company the same A company have:

Q=10*(100-2P) or P=50-((1/2)/10)Q


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Supply

Change in Supply Curve

S1=>S2:Supply increase; S2=>S1: Supply decrease

P($/Kg)

Q (Kg)

S1

S2


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Equilibrium


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P ($/Kg) Qd (Kg) Qs (Kg) Qd and Qs

0 18 0 Qd > Qs Excess Demand



3 9 9 Qd = Qs Equilibrium

4 6 12 Qd < Qs Excess Supply




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Equilibrium

III. Equilibrium of Demand and Supply


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P($/Kg)

Q (Kg)

S1D1

E1

Qe1

Pe1


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Equilibrium

No change in Supply; Demand Change


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P

($/Kg)

Q (Kg)

S1

D1

E1

Qe1

Pe1

E2

Qe2

Pe2

D2


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Equilibrium


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No change in Demand, Supply change

P

($/Kg)

Q (Kg)

S1

D1

E1

Qe1

Pe1

E2

Qe2

Pe2

S2


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Equilibrium

No change in the S

D increase => Pe increase ; Qe increase

D decrease => Pe decrease; Qe decreaseNo change in the D

S increase => Pe decrease ; Qe increase

S decrease => Pe increase; Qe decrease


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Tastes

Price of Y

Demand for X

.

Climate, Weather

Technology

Price of inputs

Income

Supply for X

Pe Qe

HUNH VN THNHthinh huynhvan@gmail com

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chapter 1 demand and supply

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