16-01-2014, 05:00 PM
SUPPLY & DEMAND
SUPPLY & DEMAND.ppt (Size: 1.05 MB / Downloads: 28)
Examining a Market
The market for any good or service consists of all buyers and sellers of that good.
As economists, typically represent a basic market in the form of supply and demand.
Demand
Demand curve—a graph (or schedule) showing the total quantity of a good (or service) that buyers wish to buy at each price.
Why is the demand curve downward sloping?
Shifts in Demand Curves:
1. Change in the price of a complement.
2. Change in the price of a substitute.
3. Change in consumer income.
4. Change in preferences of demanders of the good.
5. Change in the population of potential buyers.
6. An expectation of higher future prices.
Shifts in Supply Curves:
1) Changes in the cost of materials, labor, or other inputs used in the production of the good or service.
2) An improvement in technology that reduces the cost of production of the good or service.
3) A change in the weather (especially for agricultural products).
4) A change in the number of producers (suppliers).
5) An expectation of lower future prices.
Credit Crunch
In a credit crunch banks greatly reduce their lending. As a result, the supply curve for bank loans shifts inward.