Post on 04-Jan-2016
Determinants of Supply and Demand
3-1© 2012 McGraw-Hill Ryerson Limited
LO1
Determinants of Demand Determinants of SupplyConsumer preferences Prices of productive resources
Consumer incomes Business taxes
Prices of related products Technology
Expectations of future prices, incomes, or availability
Prices of substitutes in production
Population: its size, income distribution, and age
Future expectations of suppliers
Distribution Number of suppliers
Simultaneous Changes in Supply and Demand
• Increase in both demand and supply leads to an increase in equilibrium quantity; price may rise or fall
3-2© 2012 McGraw-Hill Ryerson Limited
LO1
Self-Test Explain what effect the changes will have on equilibrium price
and quantity in the following markets:
3-3© 2012 McGraw-Hill Ryerson Limited
LO1
Market Changea)Day-care
services
More mothers with small children are returning to the labour force; at the same time, government decides to introduce subsidies for day-care operators.
b) Marijuana Government severely increases the penalties for both buying and selling marijuana.
c) Compact discs
A new processing method significantly reduces the costs of producing CDs; at the same time, more consumers download music directly onto their computers.
d)Organic vegetables
Vegetarianism increases as a result of medical reports extolling its health benefits; at the same time, tighter regulations on the definition of organically grown products are introduced.
Market Changea)Day-care
services
b) Marijuana
c) Compact discs
d)Organic vegetables
Self-Test Explain what effect the changes will have on equilibrium price
and quantity in the following markets:
3-4© 2012 McGraw-Hill Ryerson Limited
LO1