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The Importance of Supply & Demand

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sean Tidmore

on 7 May 2014

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Transcript of The Importance of Supply & Demand

What Is Supply & Demand?
Supply & Demand is perhaps the most fundamental concept in economics.
Its also the foundation of the market economy.
Equilibrium
When Supply & Demand are equal (intersecting). This is when things are are at its most efficient.
LAW of Demand
For virtually all goods and services, a
higher price
leads to a
reduction
in
quantity demanded
and a l
ower price
leads to an
increase
in
quantity demanded
. Ceteris paribus
Law of Supply
This means that the
higher the price
, the
higher the quantity supplied
. Producers supply more at a higher price because selling a
higher quantity
at a
higher price increases revenue.
Ceteris Paribus
Movements & Shifts
Shifts:
Entire Movement of the demand or supply curve. Either Right or Left
The Key Importance of Supply & Demand
The End
By: Sean Tidmore

Supply and demand set the price and the amount of a good that will be produced.
When the demand is high the price will be less, but when the price is high the demand will be less.
Supply and demand wouldn't work with out scarcity.
Scarcity is when people want more than what is available.
UNLIMITED WANTS vs. LIMTED NEEDS
*Ceteris Paribus- All other things unchanged/Vice Versa
Quantity Demanded- quantity buyers are willing and able to buy of a good or service at a particular price during a particular period, ceteris paribus
Shift along demand curve! *Not entire shift*
Quantity Supplied- quantity sellers are willing to sell good or service at a particular price at a particular period. Ceteris Paribus
Shift along Supply Curve! (change in quantity demanded.
Change in Supply is an entire shift of supply curve
Time & Supply
Supply must account for time because suppliers must but cannot always react quickly to a change in demand or price.
Must determine if temporary or permanent.
Unlike Demand, Supply has time to take into account as an added variable.
Example: Weather for example can apply to this if it's rainy season, a supplier must accommodate by upping production on umbrellas in order to meet demand.
Movements & Shifts
Movements:
Change along the curve from one point to another.
Demand: Change along the curve. Change in both price and quantity demanded
Supply: Change in both price and quantity demanded or when the price of a good changes or quantity supply changes.
Demand: A shift in a demand or supply curve occurs when a good's quantity demanded or supplied changes even though price remains the same.
Supply: shift in the supply curve implies that the original supply curve has changed, meaning that the quantity supplied is effected by a factor other than price.
Disequilibrium
Whenever price or quantity are not equal. Leading to excess supply or excess demand
Shifters
Demand:
Consumer Preference
Prices of related goods and services
Income
Demographic characteristics
Buyer expectations
Supply:
Price of factors of production
Returns from alternative activities
Technology
Seller expectations
Natural events
Number of sellers
Supply & Demand
The relationship between demand and supply underlie the forces behind the allocation of resources.




Supply and Demand are important not only in business, but in
everything
in the real world.
Everything
boils down to simple supply and demand when you actually think about it.
References
I
Heakal, Reem. Investopedia. 03 Mar. 2014
Rittenberg, Libby and Timothy Tregarthen. Principles of Macroeconomics. New York: Print.
Steve Kazarian: Professor, Macoreconomics
Full transcript