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The Market Forces of Supply and Demand

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Joshua Ax

on 9 October 2014

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Transcript of The Market Forces of Supply and Demand

The Market Forces of Supply and Demand
The theory of supply and demand
How buyers and sellers behave and interact
How supply and demand determines prices in a market economy
How price allocates the economy's scarce resources
The Market Forces of Supply and Demand
Quantity demanded
Law of Demand
Demand Schedule
Demand Curve(Price & Quantity Demanded)
Market Demand vs Individual Demand
Supply and Demand
When Supply and Demand are in balance you get what is called the Equilibrium

The Equilibrium is where Supply and Demand intersect. It is the level in which the quantity supplied is the amount that is demanded
P2 = Equilibrium Price, which balances the quality supplied with the quantity demanded

Q2 = Equilibrium Quantity, the amount demanded at the equilibrium price
How it works
S = Supply

D = Demand

Q = Quantity

P = Price

S1 = Is demonstrating a shortage in quantity of a given product

P1 = Notice the price moves accordingly along the demand line reflecting an increase in the fair market price

How shortages affect the market price
How surplus affects the market place
S = Supply

D = Demand

Q = Quantity

P = Price

S1 = As the supply increases, the demand for the product goes down reducing the prices, making it available to more people
Changes in Supply and Demand
The behavior of sellers
-The quantity supplied is the amount sellers are able to sell
-Law of Supply states that “when the price of a good rises, and everything else remains the same, the quantity of the good supplied will also rise.”
Supply curve
Shifts in Supply Curve
-Input Prices


-Number of Sellers

is a group of buyers and sellers of a particular
as a group determine the demand for a product
as a group determine the supply of a product
Competitive Market
Perfectly Competitive
Conclusion: How Price Allocates Resources
Variables that shift Demand Curve
Income(Normal & Inferior good)
Price of related goods(Substitute & Complements)
Number of Buyers
S = Supply

D = Demand

Q = Quantity

P = Price

P1, Q1 = Shows the change in both the supply and demand of a produt, you will notice that the equilibrium price has changed.
Prices determine who produces each good and how much is produced
Full transcript