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Demand
the amount consumers desire to purchase at various prices Not what they will buy, but what they would like to buy!
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10
Demand
100 150
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High demand
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Pn = Price PnPn-1 = Prices of other goods substitutes and complements Y = Incomes the level and distribution of income T = Tastes and fashions P = The level and structure of the population A = Advertising E = Expectations of consumers
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10
D1 D2
10 100 200
Demand
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Supply
The supply curve slopes upwards from left to right indicating a positive relationship between supply and price. As price rises, it encourages producers to offer more for sale whereas a fall in price would lead to the quantity supplied to fall.
200
800
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Changes in any of the factors affecting supply other than price will cause the entire supply curve to shift. A shift to the left results in a lower supply at each price; a shift to the right indicates a greater supply at each price.
100
400
900
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The Market
Price ()
S
A shift in the demand In an attempt to get curve to the left will rid of surplus stock, reduce the demand to producers 300 from will 500accept at a lower prices. Lower price of 5. Suppliers prices inhave turn the attract do not some consumers to to information or time buy. The process adjust supply continues until thestill immediately and surplus disappears and offer 600 for sale at equilibrium is once 5. This results in a again reached. market surplus (S > D)
Surplus
5
D1
300 450 600
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The Market
Price () S1
S
A shift in the supply curve to the left The shortage in the would lead to less market would drive products being up prices as some available for sale at consumers are every price. prepared to pay Suppliers more. Thewould price will only be able to offer continue to rise 100 units for sale at until the shortage a price of competed 5 but has been consumers away and astill new desire to purchase equilibrium position 600.been This reached. creates a has market shortage. (S < D)
Shortage
D
100 350 600