Determinants of Supply Demand

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By: dhavan9 (42 month(s) ago)

dear, please send me these ppt, it may be helpful to me

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Determinants of Supply and Demand : 

Determinants of Supply and Demand D Price Quantity S

Determinants of Demand : 

Determinants of Demand Change in Consumer Income: When there is an increase in income, demand for most goods increases. If there is a decrease in income, demand for most goods decreases.

Ex. You get a 5% pay raise at work. : 

S D Price Quantity Ex. You get a 5% pay raise at work. D1

Exception: Inferior goods – goods for which demand goes down as income goes up (ex. ground beef vs. steak) : 

Exception: Inferior goods – goods for which demand goes down as income goes up (ex. ground beef vs. steak) D D S S Price Price Quantity of Steak Quantity of Ground Beef D1 D1

Slide 5: 

Change in Consumer Attitudes and Tastes: If consumers like a product more based on advertising or experience in using the good, demand increases. If consumers like a good less over time, demand decreases.

Ex. You read an article that says gaming will improve your test scores in school. : 

S D Price Quantity of donuts Ex. You read an article that says gaming will improve your test scores in school. D1

Slide 7: 

Substitute Goods: Products whose uses are similar enough that one can replace the other. Ex. Coke and Pepsi Butter and Margarine VHS Tapes and DVDs

Slide 8: 

Change in the Price of a Substitute Good: If the price of a substitute good increases, this will increase demand for the original good. If the price of a substitute good decreases, this will result in a decrease in demand for the original good.

Ex. The price of Coke increases : 

Ex. The price of Coke increases D D S S Price Price Quantity of Pepsi Quantity of Coke D1 D1

Slide 10: 

Change in the Price of a Complementary Good: If the price of a complementary good increases, this will decrease demand for the original good. If the price of a complementary good decreases, this will result in an increase in demand for the original good. Ex. If the price of Wii games sharply rises, the demand for Wii consoles will decrease.

Ex. If the price of Blu-Ray DVD players decreases, the demand for Blu-Ray DVDs will increase. : 

Ex. If the price of Blu-Ray DVD players decreases, the demand for Blu-Ray DVDs will increase. D D S S Price Price Quantity of DVD players sold Quantity of DVD’s purchased D1 D1

Slide 12: 

Change in Consumers’ Price Expectations: Consumers’ expectations about the future price of a good influence demand. If consumers expect the price to increase, they try to buy more now, before the price rises. Ex. Hurricane Katrina increased demand for bottled water, batteries, candles etc. 9/11 Attack increased demand for gasoline

Ex. Post 9/11 Attack fears decreased demand for airline tickets. : 

S D Price Quantity of plane tickets sold Ex. Post 9/11 Attack fears decreased demand for airline tickets. D1

Slide 14: 

Change in the Number of Consumers in the Market: If there is an increase in the number of consumers, this will result in an increase in demand. If there is a decrease in the number of consumers, this will result in a decrease in demand. Ex. Zeeland High Schools gain 50 new students as a result of transfer next week; this will increase demand for the Dux Pond, Chix Store and both cafeterias 2nd semester ends at Hope College and students heading back home will decrease demand for Hungry Howie’s pizza and JP’s coffee

Ex. 2nd semester ends at Hope College and students head back home : 

S D Price Quantity of JP’s coffee Ex. 2nd semester ends at Hope College and students head back home D1

Determinants of Supply : 

Determinants of Supply Change in the Cost of Factors of Production: If the prices of natural resources, labor resources, or capital resources used to produce a product increases, supply will decrease. When these costs of production decrease, supply increases.

Ex. Gentex employees get an increased salary and benefits package : 

S D Price Quantity of mirrors Ex. Gentex employees get an increased salary and benefits package S1

Slide 18: 

Change in Technology: New technology often reduces producers’ costs, leading to an increase in supply.

Ex. Herman Miller develops a machine that assembles office chairs faster : 

S D Price Quantity of chairs Ex. Herman Miller develops a machine that assembles office chairs faster S1

Slide 20: 

Natural Disasters/Weather and Other Events: Poor weather may decrease supply; a strike by workers may decrease supply

Ex. Early freeze in Michigan : 

D Price Quantity of fruit Ex. Early freeze in Michigan S S1

Slide 22: 

Government Policies: Government taxes on certain items may increase or decrease the cost of production and lead to a shift in supply Ex.Tariffs Quotas Trade Agreements

Ex. Government institutes a tariff on Japanese Automobiles : 

D Price Quantity of Japanese autos Ex. Government institutes a tariff on Japanese Automobiles S S1