supply and demand in economics
TRANSCRIPT
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SUPPLY , DEMAND ANDTHE MARKET PROCESS
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Presented By :
Nilesh Gadge MS1112059
Sachin Methree MS1112072
Vicky Mhatre MS1112074
Neelakshi Kushwaha MS1112070
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Consumer Choice
And The
Law Of Demand
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is the inverse relationship between the
price of a good and the quantityconsumers are willing to purchase.
Market Demand Schedule :
is a table that shows the quantity of agood people will demand at varyingprices.
Law Of Demand :
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Changes In Consumer Income
Change In The Number Of
Consumers Change In The Price Of A
Related Good
Changes In Expectations
Demographic Changes
Changes In Consumer TastesAnd Preferences
The following will lead to a change in
demand :
Demand Curve Shifters
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Producer Choice
And The
Law Of Supply
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Opportunity Costs
Cost AndThe Output
Of
Producers Producers
purchasesresourcesand use
them
EconomicCost
The cost of
all theresources
used toproducegoods
AccountingCost
Often ignores
theopportunitycosts of theresources
owned by the
firm
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The law of supply isreflected by the
shape of the supplycurve.
As the price of agood rises
producers supplymore.
Market Supply Schedule:
Supply120
100
80
40
0 20 30 40 50
Price(monthly bill)
Quantity(millions ofsubscribers)
60
60
70
10
Law of Supply
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140
120
100
80
60
5 10 15 20 25
Market price= $100
Price(monthly bill)
Quantity(millions ofsubscribers)30
Producers are willing tosupply the first 17 millionunits for less than $100.
The area above the supplycurve but below the actualmarket price represents
producer surplus.
Producer surplus representsthe net gains to producers
from market exchange.
Producer
surplus
Supply
Producer Surplus Producer surplus is the
difference between the
lowest price a supplier willaccept to
produce the good and theprice they actually get .
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The following will cause a change in
supply :
Changes In Resource Prices
Changes In Technology
Elements Of Nature And PoliticalDisruptions
Changes In Taxes
Supply Curve Shifters
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7
89
10111213
Excesssupply Downward
Demand And Supply Conditions :
Equilibrium will occur where thequantity demanded equals the quantitysupplied.
With an excess supply present, there will
be downward pressure on price to clearthe market.
Quantity demanded= 450
Quantity supplied= 600
Market Equilibrium
Price(dollars)
Quantity
supplied(per day)
Quantity
demanded(per day)
12 600 450
10 550 550
8 500 650
Conditionin the
market
Directionof pressure
on price
Price ($)
450 500 550 600 650
Quantity
D
S
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7
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10111213
Excesssupply Downward
With market balance present, there
will be an equilibrium present andthe market will clear.
D
S
Market Equilibrium
Price(dollars)
Quantitysupplied(per day)
Quantitydemanded
(per day)
12 600 450
10 550 550
8 500 650
Conditionin the
market
Directionof pressure
on price
>
Price ($)
450 500 550 600 650
Quantity
< Excessdemand UpwardBalance Equilibrium
Quantity demanded= 550
Quantity supplied= 550
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Excesssupply
Excess
demand
7
89
101112
13
Excesssupply Downward
D
SMarket Equilibrium
Price(dollars)
Quantitysupplied(per day)
Quantitydemanded
(per day)
12 600 450
10 550 550
8 500 650
Conditionin the
market
Directionof pressure
on price
>
Price ($)
450 500 550 600 650
Quantity
< Excessdemand Upward= Balance Equilibrium
Equilibriumprice
Excess Supply
Excess Demand Equilibrium Price
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140
120
100
80
60
5 10 15 20 25
Market price
= $100
Net Gains To Buyers And SellersPrice(monthly bill)
Quantity(millions ofsubscribers)30
Supply
Demand
Equilibrium
Net gains tobuyers andsellers
Consumer Surplus +
Producer Surplus = NetGains To Buyers AndSellers
When Equilibrium IsPresent, All Of The
Potential Gains FromProduction And ExchangeAre Realized.
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140
120
100
80
60
5 10 15 20 25
Equilibrium and EfficiencyPrice(monthly bill)
Quantity(millions ofsubscribers)30
Supply
Demand
140
120
100
80
60
5 10 15 20 25
Price(monthly bill)
Quantity(millions ofsubscribers)30
Supply
Demand
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140
120
100
80
60
5 10 15 20 25
Price(monthly bill)
Quantity(millions ofsubscribers)30
Supply
Demand
All units valued morethan their costs are
produced and
The potential gains fromproduction and exchange
are maximized.
Outcome is economicallyefficient.
Equilibrium and Efficiency
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The InvisibleHand Principle
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C
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The efficiency of market organization is
dependent upon:The presence of competitive markets.
Well-defined and enforced privateproperty rights.
Conclusion
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