Download Supply and Demand

Supply and Demand
Demand
Supply
Business and Labor
Demand
Demand
 The desire, willingness,
and ability to buy a good
or service you must
WANT a product
 Demand schedules
organize the quantity of
a product that someone
is willing to buy at a
range of possible prices
 Demand can be shown
using a graphdemand
curve
Demand Schedule
Price
Quantity
$50
0
$40
1
$30
1
$20
2
$10
3
$5
5
Demand

Law of Demand Quantity demanded and
price move in opposite directions (the higher the
price, the lower the demand and vice versa)
Demand
Individual vs. Market Demand
 Companies are interested in what everybody wants, not
just one person
 Market Demand the total demand of all consumers
 Everything we buy has a utility (satisfaction we get
from product)
 After a while, we get less and less pleasure from a
product, the more we use it diminishing marginal
utility
 This is why a demand curve slopes down- consumers
are unwilling to pay a high price for something that
does not bring as much pleasure
Demand
Factors affecting Demand
 When demand goes down, people are willing to buy
fewer items at a certain pricecurve shifts to left
Demand

When demand goes up, people are willing to buy more
of the same item at any given pricecurve shifts to
right
Demand
Factors affecting Demand
 1. Changes in number of Consumers more consumers, more
demand
 2. Change in consumers’ income more income, more demand
 3. Change in consumers’ taste more popular, more demand
 4. Change in consumers’ expectationsway ppl. think about
future
 5. Change in substitutes demand changes in competing
products change (computers)
 6. Changes in complements products that are used together
(DVD and DVD player)
Demand
Elastic vs. Inelastic Demand
 Sometimes demand is elastic- demand for a
product responds greatly to a change in price
(Cars)
 Demand is inelastic when price changes have
very little effect on the demand for the product
(Medicine)
Supply
What is Supply?
 Supply is all the quantities of
goods/services producers are wiling
to sell at all possible prices
opposite of demand
 Buyers demand different numbers
of goods based on the selling price
of an item
 Law of SupplyAs the price goes
up, the quantity supplied rises, as
the price goes down, the quantity
supplied lowers
 Supply can be represented in a
chart and a graph, like demand
Supply Schedule
Price
Quantity
$50
100
$40
90
$30
70
$20
30
$10
10
$5
1
Supply



A supply curve slopes upward suppliers are willing to offer
mores goods/services at a higher price and fewer at a lower price
Businesses hope to make a profit- money received for its
product above the amount spent for cost
Price is the most significant influence on the quantity supplied
Supply
Changes in Supply
 Supply increases and decreases depending on certain
factors
 When supply goes down, the supply curve moves to the
left
Supply

When supply goes up, the supply curve moves
to the right
Supply
Factors Affecting Supply
 Cost of the resource- when cost of the factors
of production go up or down
 Productivity- if a business is more efficient, it
will save money and supply will go up
 Technology
 Change in Government Policy- gov’t makes new
laws/regulations affecting price or productivity,
supply goes up or down
Supply
Elasticity of Supply
 A measure of how the quantity of a good
changes in response to a change in price
 If quantity changes a lot, product is elastic, if
not, it is inelastic
Business and Labor
Three Types of Businesses
1. Proprietorship- a business owned and operated by a single
person
Pros: Flexibility- you are your own boss
Cons: Financial responsibility unlimited liability;
difficult to raise capital; finding employees
2. Partnership- a business owned by 2 or more ppl.
Pros: Make more money
Cons: Complex legal structure; owners have unlimited
liability (assume all debts)
3. Corporations- Business recognized by the federal
government must have a charter (gov’t permission) to start
corporation, certain number of stocks, stockholders, and a
board of directors
Pros: Easy to find capital; become huge; limited
liability the company, not individual, pays for debts
Cons: Expensive; business owners have little say in running
company
Business and Labor
Labor Unions
 Groups of workers who band together to have a better
chance of making more money and better working
conditions
 2 types of unions: craft unions(perform the same
skills), industrial unions(work in the same industry)
 Closed Unions require you to join if you work for a
particular company; Union shops allow companies to
hire non union people, but they must join once they are
hired
 Right-to-work states prevent mandatory union
membership
Business and Labor

Labor unions negotiate in different ways
Collective Bargaining: Co. boss and Union boss
negotiate
 Mediation: Bring a 3rd party into talks, give advice
 Arbitration: 3rd Party decides disagreement


When negotiations break down, unions use
different techniques

Strike or Boycott management can lockout
employees; court order injunction to prevent strike
Business and Labor
Responsibility of the Business
 Consumer- sell quality products that are safe
 Owners of the business- reveal financial info
to stockholders (transparency)
 Employees- safe workplace, treat workers
without discrimination