经济学EconomicsforToday3E3

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1、Chapter 3Market demand and supplyKey concepts Defining demand Changes to demand if price or other factors change Defining supply Changes to supply if prices or other factors change.Defining market equilibrium Understanding and explaining the causes and changes in market equilibrium34The law of deman

2、d There is an inverse relationship between the price of a good and the quantity buyers are willing to purchase in a defined time period,ceteris paribus.A demand schedule(table)shows the specific quantity of a good or service that people are willing and able to buy at different prices.The demand curv

3、e shows the relationship between price and quantity demanded.5Individual demand curve Note that the demand curve has a negative slope.6An inverse relationship At the higher price consumers will buy fewer units,and at a lower price they will buy more units.7Individual demand curves Line up the price

4、levels so Y-axis is the same scale.8Market demand Market demand is the horizontal summation of individual demand schedules.9If price changes When price changes,quantity demanded changes.There is a movement along the demand curve.10If non-price factors change This is known as a change in demand.That

5、is,the demand curve shifts.Rightward shift indicates demand increasing.Non-price determinants of demand Changes in demand are brought about when the following non-price determinants of demand change:number of buyers in the markettastes and preferences income expectations of buyersprices of related g

6、oods.11Impact of changes in non-price determinants1213Summary:demand If own price increases,there is a decrease in the quantity demanded a leftward movement long the demand curve.If own price falls,there is an increase in the quantity demanded.A favourable change in a non-price factor causes an incr

7、ease in demand a rightward shift of the whole curve.An unfavourable change in a non-price factor causes a decrease in demand.14The law of supply There is a direct relationship between the price of a good and the quantity sellers are willing to offer for sale in a defined time period,ceteris paribus.

8、The supply schedule(table)shows the quantity of a good or service that firms are willing and able to offer for sale at different prices.The supply curve depicts the relationship between price and quantity supplied.15An individual sellers supply curve for DVDs Note that the supply curve has a positiv

9、e slope.16A positive relationship At a higher price,sellers will offer more units for sale,as it is more profitable for sellers to supply more at higher prices.17Individual supply curves Line up the price levels so Y-axis is the same scale.18Market supply Market supply is the horizontal summation of

10、 individual supply schedules in the market.19Changes in quantity supplied If the price changes,quantity supplied changes.This is a movement along the supply curve.20Changes in supply A change in non-price factors is known as a change in supply;i.e.,the supply curve shifts.Rightward shift indicates s

11、upply increasing.Non-price determinants of supply Changes in supply are brought about when the following non-price determinants of supply change:number of sellers in the markettechnology availableinput pricestaxes and subsidiesexpectations of producersprices of other goods the firm could produce.212

12、2Impacts of changes in non-price determinants23Summary:supply If own price increases,there is a decrease in the quantity supplied a leftward movement along the supply curve.If own price falls,there is an increase in the quantity supplied.A favourable change in a non-price factor causes an increase i

13、n supply a rightward shift of the whole curve.An unfavourable change in a non-price factor causes a decrease in supply.24Market supply and demand A market exists where interaction amongst buyers and sellers determines the price and quantity of goods and services exchanged.This is often called the pr

14、ice system the forces of supply and demand create market equilibrium.25Equilibrium A market condition that occurs at any price for which the quantity demanded and the quantity supplied are equal.Equilibrium is the point of balance between demand and supply in the market.Supply and demand for jeans26

15、27Market forces bring change At any price other than the equilibrium price,market forces act to bring the market into balance.In a surplus there is excess supply:sellers compete for buyers by cutting their selling price.In a shortage there is excess demand:potential customers try to attain the available goods by paying a higher price.28Summary:equilibrium At equilibrium there is an efficient outcome.This is also referred to as market clearing as society maximises the benefits it receives from scarce resources.