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Supply & Demand BASICS Demand & Wants Wants = the desire for things with or without purchasing power (the ability to buy) Demand = the willingness and ability (purchasing power) to buy something Demand & Quantity Demanded Demand refers to the various quantities of a good one is willing and able to buy at different prices. Quantity demanded is the particular quantity at which one is willing and able to buy at a particular price. To illustrate their difference... Price 10 8 6 4 2 Quantity 100 120 140 160 180 To illustrate their difference... Price 10 8 6 4 2 Quantity 100 120 140 160 180 • Demand refers to the whole plan To illustrate their difference... Price 10 8 6 4 2 Quantity 100 120 140 160 180 • Demand refers to the whole plan • Quantity demanded refers to the single quantity inside the plan Individual Demand Curve A demand schedule : Price 10 8 6 4 2 Quantity 100 120 140 160 180 An individual demand curve is a curve that links the different quantity demanded of a person with their respective prices. Individual Demand Curve Price 10 8 6 4 2 Quantity 100 120 140 160 180 Plotting it on a graph Individual Demand Curve Price 10 8 6 4 2 Quantity 100 120 140 160 180 Plotting it on a graph P 0 Q Individual Demand Curve Price 10 8 6 4 2 Quantity 100 120 140 160 180 Plotting it on a graph P 10 0 100 Q Individual Demand Curve Price 10 8 6 4 2 Quantity 100 120 140 160 180 Plotting it on a graph P 10 6 0 100 140 Q Individual Demand Curve Price 10 8 6 4 2 Quantity 100 120 140 160 180 Plotting it on a graph P 10 6 2 0 100 140 180 Q Individual Demand Curve Price 10 8 6 4 2 Quantity 100 120 140 160 180 Plotting it on a graph P 10 6 2 0 100 140 180 D Q Law Of Demand P 10 2 100 D 180 Q Law Of Demand Law P 10 2 100 D 180 Q of Demand states that the quantity demanded of a good will fall when its price rises in a given period of time, ceteris paribus, and vice versa. Law Of Demand Law P 10 Negatively sloped 2 100 D 180 Q of Demand states that the quantity demanded of a good will fall when its price rises in a given period of time, ceteris paribus, and vice versa. Law Of Demand Law P 10 Negatively sloped 2 100 D 180 Q of Demand states that the quantity demanded of a good will fall when its price rises in a given period of time, ceteris paribus, and vice versa. Law Of Demand Law P 10 Negatively sloped 2 100 D 180 Q of Demand states that the quantity demanded of a good will fall when its price rises in a given period of time, ceteris paribus, and vice versa. Why P Qd ? • When the price of a good rises, the opportunity cost of buying this good rises. • Given a fixed amount of money, the quantity of a good one can buy will fall when its price rises. Supply & Wants Wants = the Supply = the desire for selling willingness and things with or ability without the (resources and ability to technology) to produce. sell something Supply & Quantity Supplied Supply refers to the various quantities of a good one is willing and able to sell at different prices. Quantity supplied is the particular quantity at which one is willing and able to sell at a particular price. To illustrate their difference... Price 10 8 6 4 2 Quantity 200 175 150 125 100 To illustrate their difference... Price 10 8 6 4 2 Quantity 200 175 150 125 100 • Supply refers to the whole plan To illustrate their difference... Price 10 8 6 4 2 Quantity 200 175 150 125 100 • Supply refers to the whole plan • Quantity Supplied refers to the single quantity inside the plan Individual Supply Curve A supply schedule : Price 10 8 6 4 2 Quantity 200 175 150 125 100 An individual supply curve is a curve that links the different quantity supplied of a person with their respective prices. Individual Supply Curve Price 10 8 6 4 2 Quantity 200 175 150 125 100 Plotting it on a graph Individual Supply Curve Price 10 8 6 4 2 Quantity 200 175 150 125 100 Plotting it on a graph P 0 Q Individual Supply Curve Price 10 8 6 4 2 Quantity 200 175 150 125 100 Plotting it on a graph P 10 0 200 Q Individual Supply Curve Price 10 8 6 4 2 Quantity 200 175 150 125 100 Plotting it on a graph P 10 6 0 150 200 Q Individual Supply Curve Price 10 8 6 4 2 Quantity 200 175 150 125 100 Plotting it on a graph P 10 6 2 0 100 150 200 Q Individual Supply Curve Price 10 8 6 4 2 Quantity 200 175 150 125 100 Plotting it on a graph P S 10 6 2 0 100 150 200 Q Law Of Supply P S 10 2 100 200 Q Law Of Supply Law P S 10 2 100 200 Q of Supply states that the quantity supplied of a good will rise when its price rises in a given period of time, ceteris paribus, and vice versa. Law Of Supply P Positively sloped Law S 10 2 100 200 Q of Supply states that the quantity supplied of a good will rise when its price rises in a given period of time, ceteris paribus, and vice versa. Law Of Supply P Positively sloped Law S 10 2 100 200 Q of Supply states that the quantity supplied of a good will rise when its price rises in a given period of time, ceteris paribus, and vice versa. Law Of Supply P Positively sloped Law S 10 2 100 200 Q of Supply states that the quantity supplied of a good will rise when its price rises in a given period of time, ceteris paribus, and vice versa. Why P Qs ? • When the price of a good rises, the opportunity cost of producing other goods rises. • When the price of its good rises, the producer can have more money for buying materials and recruiting labour.