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Economics Project Demand , Supply and Price S P F.4B Ivy Lam (21) Jenny Leung (23) Jane Li (24) Jessie Wong (34) P1 D Q1 Q catalogue What is demand-----------1 Factors affecting changes in demand(1)-----------2 Factors affecting changes in demand(2)-----------3 Demand Schedule-----------4 Supply Schedule-----------5 How to the demand & supply diagram-----------6 What is supply-------7 Factors affecting changes in supply(1)-----------8 Factors affecting changes in supply(2)-----------9 What is excess supply/demand? What is market equilibrium price?-----------10 Summary-----------11 Member’s feel-----------12 What is DEMAND? Demand is not the same as want. Want refers to human psychological desire for things. They may not be willing to but it or they may not able to afford it. Demand is a want supported by purchasing power. A person will have an effective demand for a good only when he is willing and able to buy the good at given prices. Quantity demanded refers to the quantity of a good that a consumer is willing and able to buy at a particular price per period of time. Market demand refers to the demand for a good or service at different prices by all consumers in the market over a certain period of time, ceteris paribus. The law of demand states that the quantity demanded varies inversely with prices, ceteris paribus. FACTORS AFFECTING CHANGES IN DEMAND(1) Income: A change in income of consumers (real income that measured in terms of purchasing power)will affect their demand for goods and services.It will affect the demand for superior/normal, inferior, neutral goods. P D’ D Q When the income increase,then the demand for first-class beef will increase. Taste and preference:When there is a change When it become in tastes or preferences in favor of a good, in fashionable to wear taste goes against a good and promotion or pleated skirt,then D’ fashion,these can affect the demand for goods. the demand for D these will increase. Q Price of other related Quantity demanded Demand for raincoat When the price of goods:The substitutes for umbrella umbrella increases. and complements also can P The quantity P S affect the demand. demanded for it Substitutes are goods will decrease. As P1 that can be used to umbrella and P0 substitute/replace each P1 raincoat are D D’ substitutes, other. Complements are P0 D goods that are used demand for Q together and one requires raincoat will Q Q1 Q0 Q0 Q1 the buying of the other. increase. p FACTORS AFFECTING CHANGES IN DEMAND(2) P S Seasons and weather conditions: Demand for some goods are heavily influenced by seasons and weather conditions. Demand for paper When the demand for book increase, then the demand for paper also increase. P’ P Demand for bookQ P S P’ P D Q Population: When the population increase, there will be more consumers and demand for a good increase. D’ D Q’ D’ In summer, demand for ice-cream will increase. Q Q’ Derived demand:When a good is demanded because of demand for another good in the market, We say is a derived demand. Q Demand for food P S P’ P D Q Q’ D’ Q In Li’s family, Mrs Li born a baby, then demand for food in this family will increase Demand Demand Schedule Price ($) Demand Schedule is a plan of purchases of an individual showing the quantity of the good he is willing to buy at different prices. quantity Demand curve A demand curve shows the negative relationship between the price and the quantity demanded within a time period, holding all the other factors constant. It is downward sloping. Supply Supply Schedule Price ($) Supply schedule is a plan of production of a firm showing the quantity of a good he is willing and able to sell at different prices. Quantity A supply curve shows the positive relationship between the price and the quantity supplied within a time period, holding all other factors constant. It is upward sloping. Supply curve (s) How to draw the demand/supply diagram?!? WRITE DOWN [DEMAND /SUPPLY DIAGRAM FOR XXX] 1: DRAW A VERTICAL LINE(PRICE) 2:DRAW A HORIZONTAL LINE Demand /Supply Diagram For xxx P (QUANTITY PER XXX) 3:READ THE DEMAND/SUPPLY SCHEDULE X X 4:POINT THE PRICE AND QUANTITY DEMANDED/ SUPPLIED 5:LINK THESE POINT 6:THIS IS THE DEMAND CURVE(D) THIS IS A SUPPLY CURVE(S) X X S X X D Q What is Supply? Supply refers to the producer’s willingness to sell, supported by the ability to sell. A producer will have an effective supply for a good only when he is willing and able to sell the good at given prices. Quantity supplied refers to the quantity of a good that a producer (or seller) is willing and able to offer for sale at a particular price per period of time. Market supply refers to the supply of a good or service by all producers in the market over a certain period of time, ceteris paribus. The law of supply states that quantity supplied varies directly with price, ceteris paribus. Factors affecting changes in supply(1) P Cost of production: An Po increase in factor prices will lead to a higher cost of P1 production, the firm will be able to produce less at the same price. With an improvement P in technology,the Po production cost P1 decreases, there will be an increase in supply for computers. S S D Q0 Q1 Q1 S’ D Q0 S’ Q If the production cost decreases,there is an increase in supply for clothes. The supply curve will shift to the right. Q Technology: With improvement in technology, a more output can be produced with the same amount of factor inputs. Supply will increase and the supply curve shifts to the left. Joint good Price of related goods: it is competitive P S P S’ Joint supply supply and joint supply. Competitive S Po is opposite supply :Two goods are in competitive P1 of P1 supply if an increase in the supply of P0 D competitive one good leads to a decrease in the good. Q Q0 Q1 Q0 supply the other. Joint supply: Two Q1 Q When the price of mutton increase, the goods are in joint supply if an increase quantity supplied of wool increase. As mutton in the supply of one good leads ti an and wool are produced together, more wool will increase in the supply of the other . be available and the supply of wool will increase. Factors affecting changes in supply(2) P Producers’ objective: Different producers has different objectives in production. This affects their plans of production and hence their supply. P1 P0 S’ P When it have typhoon, then the P1 supply of vegetables P0 will decrease. When the aim of supply dress increase,then the supply of dress will increase. S Q0 Q1 Q S D Q1 Q0 Q Season and weather conditions: The supply for some good are heavily influenced by seasons and weather conditions. Expectation of future prices: When firms expect the price of a good to rise, their present supply for the good decrease, in the hope of selling more at a higher price in the future. P S S’ Number of sellers: when there re more In Li’s toy company, the P0 sellers, the supply for a good will number of sellers increase, P1 then the supply of toy will D increase, or vice versa. increase too. Q0 Q1 Q What is excess supply/demand? What is market equilibrium price? Excess supply ( surplus) is the quantity supplied is greater than the quantity demanded. Excess demand is the quantity demanded is greater than the the quantity supplied. Equilibrium price is the price in the market at which there is no tendency for it to change as long as consumers’ plan of purchase and firms’ plan of production do not change. In other words, the other words, the demand and the supply curve do not shift. Graphically, such changes are represented by shifting of demand and supply curve or both. Summary It shows the market demand and supply schedules for dress in HK in a month. Price per units($) Qs before cost Qs after cost Qd before it fashionable Qd after it fashionable 800 1000 2000 600 800 600 800 1600 800 1000 400 600 1200 1000 1200 800 QD xQD’ x QS x x QS’ 700 x 600 x x 500 400 x x x 300 200 100 0 100 200 300 400 500 600 700 800 900 1000 1100 1200 1300 1400 1500 1600 1700 1800 1900 2000 MEMBER’S FEEL Ivy Lam: It can help me know it more clearly to know about it and the real situation. It just look like a exercise or text for us to study and research economics more deep. Jenny Leung: I feel after I finished this project, then it can increase my knowledge of demand, supply, and equilibrium price. Jane Li: In this project, the most important thing is it can help us know the meaning of demand and supply clreadly. Jessie Wong: Although economics is different, this project’s topice is more different , we finished this project not easy………….it can help us so much. BYE BYE