Scribd
Upload
2 views

re

The lecture covers the concepts of demand and supply, including how to determine market prices and quantities using demand and supply curves. It discusses the effects of price changes and other factors on demand and supply, as well as the conditions under which the supply and demand model is applicable. Additionally, it addresses market equilibrium and the impact of government intervention on market dynamics.

Uploaded by

reco83
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
2 views

re

The lecture covers the concepts of demand and supply, including how to determine market prices and quantities using demand and supply curves. It discusses the effects of price changes and other factors on demand and supply, as well as the conditions under which the supply and demand model is applicable. Additionally, it addresses market equilibrium and the impact of government intervention on market dynamics.

Uploaded by

reco83
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 21

Managerial Economics

Lecture. 2

Dr. Shimaa Mahgoub


4 Nov 2023
Chapter. 2
Demand and Supply
Learning Objectives

 Determine a good’s market price and quantity using supply


Learning
and demand curves
 Predict how an event that affects consumer of firms changes
the market price and quantity
 Analyze the market effects of government policy using the
supply and demand model.
Objectives
 Determine for each market the supply and demand model is
appropriate
Structure

01 02 03
Definitions Supply and Demand Equilibrium

04 05 06
Shocks Effects of Gov. Intervention When we use the
supply and demand
01 Definitions
Demand and Quantity demanded
Supply and Quantity Supplied
Equilibrium
Shocks in the demand side
Shocks in the supply side
Demand and Quantity demanded

Slope Downward
Relationship between
the quantity
demanded (units,
duration) and the
price (unit)
Demand and Quantity demanded
The quantity of a good or services demanded by consumers depends on the price of a
good

The price of goods that are substitutes and implements consumers’ incomes, the
information they have about the good, their tests, gov. regulations, and other factors.
A change in price causes a movement a long the demand curve.

However, a change in other relevant factors such as income, .. That affects demand
other than price causes a shift in the demand curve.
.................
Getting a total demand curves of individuals/ other subgroups of consumers requires
adding the quantities demanded by each individual at given price.
The effects of a price change on the quantity demanded

• The Law of Demand says that demand curves slope downward: the
higher the price, the less quantity of goods demanded.
• This downward trend illustrates that consumers demand a larger
quantity of this good when its price is low and vice versa.
• These changes in the quantity in response to the changes in price are
movement along the demand curve
• “ what happens to the quantity demanded if the price changes, when all
other factors are held constant?
The effects of other factors on demand
How can we use demand curves to show the effects of a change in one of
these other factors, such as income?
A simpler approach to show the effect of factors other than a good’s price on
demand .
A change in any relevant factor of the good causes a shift of the demand
curve rather a movement along the demand curve
The price of related goods (Substitutes; complements) affect the Q
demanded of a good.
A shift of the demand curve

- Substitutes: If the price of tea go


up and the price of the good
(coffee) is fixed, the quantity
demanded of coffee shifts to the
right.
- Complements have the opposite
effect.
The Demand Function
Using a mathematical relationship called the demand function, showing
the effect a good’s own price and other relevant factors on the QD.
Any other f. aren’t explicitly listed in the DF are assumed to be
irrelevant/ held constant.

Q= D (p, y) …….. General Functional Form


meaning that the Q of coffee demanded, D is the demand function , P is
the price of coffee, and Y is income.

Shows how the QD varies with the price and the income of consumers.
P, y are the explanatory Vs.
Summing the Demand Curves
The total QD at a given price is the Sum of the QDs- each consumer at
this price.

Q1= D 1(p)…. DF for the Consumer 1


Q2= D2 (p)…….DF for the Consumer 2

at price p, consumer 1 demand s Q1 units, consumer 2 demand s Q2 units


the total QD by both consumers is the sum of these two Qs
Q= Q1 + Q2 = D 1(p)+D2 (p)
Supply and Quantity Supplied

Slope Upward
Relationship between
the quantity
Supplied (units,
duration) and the
price (unit)
Supply and the Quantity Supplied
The Q of goods or services Supplied by firms depends on the price, costs of
inputs, the state of technology, Gov. regulations, and other factors. .

The market supply curves usually slope upwards/


A change in price causes a movement a long the supply curve.

A change of an input or tech. causes a shift of the supply curve.


The total supply curve is the sum of the supply curves for individual firms.
Supply Law

An increase in the price of coffee causes a movement along the


supply curve : firms supply more coffee.
Law of Supply states that the SC is upward sloping
Meaning that that the higher the price, the larger, the Q that firms
supply , holding other factors constant.
Effects of other variables on Supply
Supply Function
When to use the supply and demand model

Is a powerful tool used to explain what happens in a market and to market


predictions about what will happen if an underlying factor changes.
The model accurately predicts what occurs in some markets but not others.
The supply and demand model performs best in explaining and
predicting behavior of markets with many buyers and sellers , with
identical or very similar products provided by different producers, with
free entry and exit by producers, with full information about price and
other market characteristics and with low transaction Cost.
Market Equilibrium
Effects of the Gov. Intervention
Shocks to the Equilibrium

You might also like

pFad - Phonifier reborn

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.

Note: This service is not intended for secure transactions such as banking, social media, email, or purchasing. Use at your own risk. We assume no liability whatsoever for broken pages.


Alternative Proxies:

Alternative Proxy

pFad Proxy

pFad v3 Proxy

pFad v4 Proxy