Demand SFLS
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Transcript of Demand SFLS
Supply and Demand model
Supply and Demand Model
- A Competitive Market
Assumptions:- market with many buyers and many
sellers and perfect information.
To began analyzing the model and to make it work, we assume a few assumptions in place first:
- No monopolies. 没有垄断
Supply and Demand Model
- A Competitive Market
Assumptions:
To began analyzing the model and to make it work, we assume a few assumptions in place first:
- Rational Thinking - People usually exploit opportunities to make themselves better off.
Supply and Demand Model
- A Competitive Market
Assumptions:
To began analyzing the model and to make it work, we assume a few assumptions in place first:
- Rational Thinking
- Ceteris Paribus - A Latin word for – “All else being the same”
在其他条件不变的情况下
Supply and Demand Model
- A Competitive Market
Assumptions:To began analyzing the model and to make it work, we assume a few
assumptions in place first:
- Rational Thinking- Ceteris Paribus It’s important to note, that just
because you want something doesn’t always mean you Demand it.
( Demand is only what we can measure. )
Key point:We will focus on Demand
first
So do you like cake?
Would you like one like
this?
Or would you like one like
this?
I was hoping these pictures would have you think about cake differently.
Why did I show you this?
First you wanted cake... then you didn’t.
But I never talked about prices of cake!!!
- Ceteris Paribus, (all other things staying the same) the relationship between the quantity demanded and the price of a good. 你要多少 , 在一个给定的的价格
Supply and Demand Model
Demand
Do you like Chicken?
Or maybe not like chicken?
- Ceteris Paribus, (all other things staying the same) the relationship between the quantity demanded and the price of a good. 你要多少 , 在一个给定的的价格
Supply and Demand Model
Demand
This idea change is a change in Demand
Would you buy it at this
price?
99 元
127 元 Would you
buy it at this price now?
- The amount of anything that people are willing and able to buy during a specified period at a specified price. 现在购买, 在这个价位
Supply and Demand Model
Quantity Demanded
This change due to price is a change in Quantity
Demanded
- The amount of anything that people are willing and able to buy during a specified period at a specified price. 现在购买, 在这个价位
Supply and Demand Model
Demand
Quantity Demanded
This one is about prices
This one is NOT about
prices
- The amount of anything that people are willing and able to buy during a specified period at a specified price. 现在购买, 在这个价位
Supply and Demand ModelDemand
Quantity Demanded
- Ceteris Paribus, (all other things staying the same) the relationship between the quantity demanded and the price of a good. 你要多少 , 在一个给定的的价格+
=The Law of Demand
Ceteris Paribus, (all other things staying the same) If the price of a good rises, the quantity demanded decreases. If the price of a good falls, the quantity demanded increases
Supply and Demand ModelThe Law of Demand
Ceteris Paribus, (all other things staying the same) If the price of a good rises, the quantity demanded decreases. If the price of a good falls, the quantity demanded increases
This is a movement along the demand curve and does not change where the demand curve is.
Price
Price
Quantity Demanded
Quantity Demanded
788.18.9
10.011.514.2
Price of chicken (per
pound/500kg)
Quantity of chicken demanded (billions of pounds/500kg)
654321
7
Demand Schedule for chicken
DEMAND
70 9 11 1513 17
7
6
5
4
3
2
1
Price of chicken
(per pound)
Quantity of chicken (billions of pounds)
Demand curve, D
A movement along the demand curve is a change in the quantity demanded of a good that is the result of a change in that good’s price.
788.18.9
10.011.514.2
Price of chicken (per
pound/500kg)
Quantity of chicken demanded (billions of pounds/500kg)
654321
7
Demand Schedule for chicken
DEMAND (quantity)
70 9 11 1513 17
7
6
5
4
3
2
1
Price of chicken
(per pound)
Quantity of chicken (billions of pounds)
Demand curve, D
A
B
A movement along the demand curve is a change in the quantity demanded of a good that is the result of a change in that good’s price.
7 8.1 9.70 10 1513 17
$2.00
1.75
1.50
1.25
1.00
0.75
0.50 D1 D2
A C
B
A shift of the demand curve…
… is not the same thing as a movement along the demand curve
Price of chicken
(per 500kg))
Quantity of chicken (billions of
500kg)
Changes (shifts) in DEMAND
Changes in Demand without the price changing
Shift Left
Shift Right
DEMAND (shifts)
This is a shift of the demand curve itself at any given price
= Less Demand at the same price
= More Demand at the same price
An “increase in demand” means a rightward shift of the demand curve: at any given price, consumers demand a larger quantity than before. (D1D2)
Shifts of the Demand Curve
A “decrease in demand”, means a leftward shift of the demand curve: at any given price, consumers demand a smaller quantity than before. (D1D3)
Price
Quantity
D3 D1 D2
Increase in demand
Decrease in demand
Changes (shifts) in DEMAND
(NOT quantity demanded)
1.) Number of Buyers2.) Income
i) Normal goodsii) Inferior goods
3.) Prices of Related Goodsi) Substitutesii) Compliments
a.) Composite Demand
b.) Joint Demand4.) Preferences5.) Expectations
The short answer is: Everything else that is NOT due to a change in price!
5 main reasons:
More people = more Demand at every given priceLess people = less Demand at every given price
Changes (shifts) in DEMAND
1.) Number of Buyers
Demand…
More Demand…
2.) Incomei.) Normal good
Demand increases when income increases
Demand decreases when income decreases
A good for which
and
Changes (shifts) in DEMAND 1.) Number of Buyers
Income Increase
i.) Normal good
Demand increasesBuy more of this at the same price
Income Decrease
Demand decreases Buy less of this at the same price
2.) Incomei.) Normal good
Changes (shifts) in DEMAND 1.) Number of Buyers
ii.) Inferior good
Demand increases when income decreases
A good for which
and
Demand decreases when income increases
Income Increase
Demand decrease Buy less of this at the same price
Income Decrease
Demand increasesBuy more of this at the same price
ii.) Inferior good
2.) Income
Changes (shifts) in DEMAND 1.) Number of Buyers
3.) Prices of Related goodsi.) Substitutes替代
Demand increases, if the price of its substitutes rises.
A good that can be consumed in place of another good.
Demand decreases, if the price of its substitutes falls.
and
Price of this goes up
i.) Substitute
Increase Demand of this
= Buy less of it but more of this =
Price of this goes down
Decrease Demand of this
= Buy more of this but less of this =
2.) Income
Changes (shifts) in DEMAND 1.) Number of Buyers
3.) Prices of Related goodsi.) Substitutes
ii.) Complement 补充 A good that is consumed with another good.
Demand increases, if the price of its complements falls.
and
Demand decreases, if the price of its complements rises.
Price of this goes up Decrease demand of this
= Buy less of it and buy less
of this =
Price of this goes down Increase demand of this
= Buy more of it and buy more
of this =
(the price of this didn’t change)i.) Complement
2.) Income
Changes (shifts) in DEMAND 1.) Number of Buyers
3.) Prices of Related goodsi.) Substitutes
ii.) Complement 补充
- Composite Demand A good of service demanded that has multiple uses.
Ipads can have many
uses
But usually in my house only one use
2.) Income
Changes (shifts) in DEMAND 1.) Number of Buyers
3.) Prices of Related goodsi.) Substitutes
ii.) Complement 补充
- Composite Demand - Joint Demand When two or more goods are
demanded to satisfy the same want.
not substitutes for each other, but are complement each other.
Cars + Gasoline = Let’s go!
2.) Income
Changes (shifts) in DEMAND 1.) Number of Buyers
3.) Prices of Related goods
4.) Preferences 首选项When preferences change, the demand for
one item increases and the demand for another item (or items) decreases.
More people used to smoke because it was
OK
Today preferences
have changed in many places
2.) Income
Changes (shifts) in DEMAND 1.) Number of Buyers
3.) Prices of Related goods4.) Preferences
Expected future income and expected future prices influence demand today.
For example:if the price of a computer is expected to fall next month, the demand for computers today decreases.
5.) Expectations 期望
Expecting rain?
means higher demand for an
umbrellas
Changes (shifts) in DEMAND
(NOT quantity demanded)
1.) Number of Buyers2.) Income
i) Normal goodsii) Inferior goods
3.) Prices of Related Goodsi) Substitutesii) Compliments
a.) Composite Demand
b.) Joint Demand4.) Preferences5.) Expectations
The short answer is: Everything else that is NOT due to a change in price!
5 main reasons:
Individual Demand All of these factors are related to individual demand of stuff.
We want to also look at markets as a whole of many people.
We have seen so far that number of buyers is related to changes in demand.
Supply and Demand Model
Individual Demand
Supply and Demand Model
The sum of the demands of all the buyers in a market.
Add up each person’s Individual Demand = Market Demand
Market Demand
All these reasons discussed are for individual people
++
++
++
=
For the market, just add them all
up!
So to Summarize…
Supply and Demand Model
- A Competitive Market
Assumptions:
To began analyzing the model and to make it work, we assume a few assumptions in place first:
- Rational Thinking
- Ceteris Paribus - A Latin word for – “All else being the same”
在其他条件不变的情况下
- The amount of anything that people are willing and able to buy during a specified period at a specified price. 现在购买, 在这个价位
Supply and Demand ModelDemand
Quantity Demanded
- Ceteris Paribus, (all other things staying the same) the relationship between the quantity demanded and the price of a good. 你要多少 , 在一个给定的的价格+
=The Law of Demand
Ceteris Paribus, (all other things staying the same) If the price of a good rises, the quantity demanded decreases. If the price of a good falls, the quantity demanded increases
Supply and Demand ModelThe Law of Demand
Ceteris Paribus, (all other things staying the same) If the price of a good rises, the quantity demanded decreases. If the price of a good falls, the quantity demanded increases
This is a movement along the demand curve and does not change where the demand curve is.
Price
Price
Quantity Demanded
Quantity Demanded
7 8.1 9.70 10 1513 17
$2.00
1.75
1.50
1.25
1.00
0.75
0.50 D1 D2
A C
B
A shift of the demand curve…
… is not the same thing as a movement along the demand curve
Price of chicken
(per 500kg))
Quantity of chicken (billions of
500kg)
Changes (shifts) in DEMAND
Changes (shifts) in DEMAND
(NOT quantity demanded)
1.) Number of Buyers2.) Income
i) Normal goodsii) Inferior goods
3.) Prices of Related Goodsi) Substitutesii) Compliments
a.) Composite Demand
b.) Joint Demand4.) Preferences5.) Expectations
The short answer is: Everything else that is NOT due to a change in price!
5 main reasons:
The EndThank you