1 / 28

Supply, Demand, and the Price System

Supply, Demand, and the Price System. Quick Review – the following information should be in your notes already. Elasticity – a measure of responsiveness to price. Elastic demand – consumers are very sensitive to price changes.

jana-barlow
Download Presentation

Supply, Demand, and the Price System

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Supply, Demand, and the Price System

  2. Quick Review – the following information should be in your notes already.

  3. Elasticity – a measure of responsiveness to price.

  4. Elastic demand – consumers are very sensitive to price changes.

  5. Inelastic Demand – consumers show a relatively small response to price changes.

  6. Unit elastic – consumers show a proportional response to price changes.

  7. Determinants of demand elasticity.Urgent?Amount of income requiredAre there substitutes?

  8. Determinant of Supply ElasticityHow fast can suppliers respond?

  9. Supply ShiftersCost of inputsTaxes and SubsidiesProductivityTechnologyNumber of Suppliers

  10. Government RegulationsExpectations

  11. Change / Shift in Supply S1 S2 P Q

  12. Change in quantity supplied S P2 P1 Q2 Q1

  13. Change In Demand P D2 D1 Q

  14. Demand ShiftersConsumer TastesConsumer IncomeConsumer ExpectationsNumber of ConsumersExpectationsSubstitutes / Complements

  15. Change in Quantity Demanded P2 P1 D Q2 Q1

  16. Equilibrium Price

  17. Market Clearing Price

  18. Supply is equal to demand

  19. Surplus S P1 D Qd Qs

  20. Shortage S P D Qd Qs

  21. Two Types of Price Controls Price CeilingsPrice Floors

  22. Price ceilings and price floors distort market outcomes.

  23. Price ceiling – rent control

  24. If a price ceiling is lower than the natural market clearing price, a shortage occurs.

  25. Shortage S P $1200 D 1000 2000 Qs Qd

  26. If a price floor is higher than the market clearing price, a surplus will occur.

  27. Surplus of Labor S P $10.00 D Qd Qs

  28. Price Supports

More Related