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Understanding Supply and Demand Dynamics in Economics

Dive into the concepts of supply and demand, including market dynamics, price effects, equilibrium, shortages, and surpluses. Discover how these factors shape economic decisions and outcomes. Television activity included in handout.

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Understanding Supply and Demand Dynamics in Economics

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  1. SUPPLY AND DEMAND

  2. Demand • The quantity of a specific product that a buyer is ableand willing to buy at a certain price • Usually at a particular time and place • Remember those time and place utilities that add value to a product?? • Individual demand – the quantity of a product demanded by an individual consumer • *Market demand – the sum of all the individual demands for a specific product for a specific time period

  3. Supply • The quantity of a specific product that the supplier is willing to supply at a certain price. • Individual supply – the quantity of a product supplied by an individual supplier • *Market supply – the sum of all the individual suppliers’ supply of a specific product for a specific time period • From this point on, we will be talking about market supply and market demand.

  4. EFFECT OF PRICE ON SUPPLY AND DEMAND

  5. Law of demand(in a constant environment) • When prices fall, demand will rise. • Consumers will buy more when prices are low. • When prices rise, demand will fall. • Consumers will buy less when prices are high. • What product(s) are you familiar with where you have noticed price affecting the law of demand?

  6. Demand curve For iPhones in December in Morehead, KY Quantity Demanded

  7. Law of supply (in a constant environment) • When prices are high, supply will rise. • Suppliers are willing to supply more when the price of the product is high. • When prices fall, supply will fall. • Suppliers are willing to supply less when prices are low.

  8. Supply curve Supply curve for iPhones in Morehead, KY Quantity Supplied

  9. Equilibrium Price • The point at which the demand and supply for a particular good or service meet Price Quantity

  10. Shortage or surplus • Shortage – there is more demanded than the producers are willing and able to supply • Surplus – there is more supplied than people are willing or able to buy. • Scarcity – What is it?? Where does it fit – shortage or surplus? • - +

  11. Television activity • Complete handout – supply/demand/shortage/surplus

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