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Chapter 1.2 Demand, Supply & Price

From The World of Business, 4th Ed. Published by Nelson

Darren Yung

on 13 September 2012

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Transcript of Chapter 1.2 Demand, Supply & Price

Demand, Supply & Price Examining the relationship between the three Demand The amount of goods or service that a consumer is willing to purchase at a price. Demand Price Law of Demand Demand Price Increase in Want or Need Demand Price (sometimes) New release of a consumer device (iPod, Software/Game, TV, Phone)
Boxing Day Sale
Natural Disaster
Preparation of Necessities Four Conditions That CREATE Demand Awareness Advertisement
Social Media
Word of Mouth
Hype Supply Enough to meet the demand
Barely enough Price Reasonable
Competitively Priced Location Accessibility
Convenience Factors that
Demand Income Spending typically goes up too
More disposable income Spending for certain goods can go down too
Less on groceries - why? Consumers' Tastes Fads & Trends
Music & Media
Here today, gone tomorrow Change in Future Conditions Price expected to go up
Tend to purchase now
Demand goes up
Price expected to drop
Tend to hold off purchase
Demand goes down Seasonal Purchases What are some of the goods and services that are needed/not needed during Summer, Fall, Winter and Spring? Change in Population can effect Demand Infrastructure required
schools, hospitals, office space
houses, roads, utilities
food, vehicles, clothing
Certain groups require certain goods & services
Schools/parks for children
Healthcare demands for older people Supply: The quantity of a resource that a business is willing to produce to meet the demands of its customer. Businesses want to fulfill this supply AND make a profit. Example: Two companies make the same widget
Identical in function
Identical in price
Different in manufacturing cost
Profit = Price - Cost
The company whose cost is less makes more money (a.k.a. revenue) Law of Supply Price Increase Increase in Revenue Put more goods & services on the market Pay more overtime
Higher more workers
Build factories
Buy more supplies
Buy more equipment Conditions that Affect Supply #1 - The Number of Producers Increase in producers
Increase in competition
Increase in supply
Price may go down as a result #2 - Price of related goods These are the raw materials needed for the good or service
Raw material costs go up
Increase price of product
Change the raw material #3 - Change in Technology Improved Technology
Cheaper & more powerful devices
Lower production costs #4 - Changes in Expectations Business analysts take into account
sales forecasts
financing Try to predict consumer demands in advanced
Rising oil prices
Increase in fuel efficiency
Hybrid & Electric vehicles #4 - Changes in Expectations Cheaper supplier is found
Lower costs --> Increased Revenue #5 - Changes in Production Costs Price of a good or service determined by: Demand for it
Supply of it
Price can fluctuate depending on these factors
Price also influenced by production costs
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