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Supply and Demand. Produced by J.R. Table of Contents. Overview of Supply and Demand Demand, its definitions and subspecies Supply, what it is and yada yada… Subsidies. So What Is S and D?. A simple economic model based on the idea that people act out of their own self-interest
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Supply and Demand Produced by J.R.
Table of Contents • Overview of Supply and Demand • Demand, its definitions and subspecies • Supply, what it is and yada yada… • Subsidies
So What Is S and D? • A simple economic model based on the idea that people act out of their own self-interest • First introduced by Alfred Marshall in Principles of Economics, published in 1890 • Not written of by the brilliant economists Smith, Mills or Malthius
What is Demand? The amount of good that people (or consumers) are willing and/or able to buy (or consume)
What is Utility? Utility = How much satisfaction a consumer gets from consuming, using or abusing a good or service Utility declines the more there is of something
What Influences Demand? • The price of the good • The consumer’s income • If people want/like the goods • Fashion • Amount of substitutes (copies of good) • Demand for goods used at the same time • The “Sheep” effect, celebrities, friends etc are wearing/buying/using etc the good
What Makes A Demand Curve Change? • Price never shifts a demand curve • A fall in quantity, as in Q1 – Q2 can be called a “contraction in demand.”
Where a Curve can Shift • A demand curve can shift if there is a change in its customers. • If there is a change in income, taste, fashion or etc then… • The Curve Shifts
What is Supply? The amount of a good that vendors are willing and/or able to sell at any given price
What Influences Supply? • The price of the good • The amount of “competitive goods” or look-alike products • The cost of making the good • The amount being produced • Unforeseen events (earthquakes, strikes, another gold rush…)
Looking at Supply Curves • Changes in price never shift the supply curve • Increase in quantity from Q1-Q2 is called an expansion in supply
Supply Curves Shift Only… If there is: • A change in costs • A change in the number of goods • An unforeseen event (earthquake…) Increase in supply shifts curve to right
The Area in-between the two curves around where the P and Q lines collide is the equilibrium. • If the price is too high (well above equilibrium) then there is excess supply • If the price is too low (well below equilibrium) then there is excess demand • Excess supply drives prices down, excess demand drives prices up
Subsidies • A subsidy, free money given by the government to an industry, makes the industry want to produce more of a good. Thus pushing down the supply curve. • Prices falls by less than subsidy, industry keeps money
Conclusion • Supply and Demand is a simple economic model that just makes sense when looking at human nature • The goods that there are the least of are usually the most valuable • Once there becomes a lot of something then the price usually moves down • Don’t sweat it, just think baseball cards
If you want the exact link to learn more, or review go to: http://www.bized.ac.uk/stafsup/options/notes/econ207.htm#Heading80