L05: Law Supply and Demand
Supply: the amount of a product is available
The SELLERS determine the SUPPLY
Demand: the degree to which people wants a product
The BUYERS determine the DEMAND
Equilibrium: occurs when where quantity supplied equals quantity demanded
The Market: is the way in which the economic activity is organized between
buyers and sellers through their behavior and interaction with one another.
The interaction of BUYERS AND SELLERS in the market, helps to determine the
market price.
The relationship between price and quantity demanded is so universal that is
called "THE LAW OF DEMAND"
DIAGRAM OF LAW OF DEMAND
"For consumers"
DIAGRAM OF LAW OF SUPPLY
"For producers"
DIAGRAM OF MARKET EQUILIBRIUM
"Price of goods and services equals quantity demanded"
Lack of supply results to shortage
More supply results to surplus
Supply and demand intersects each other = EQUILIBRIUM
FACTORS AFFECTING DEMAND AND SUPPLY
Changes In Demand
• Income
=When income increases they can afford to buy products that means demand
increases
• Taste and Preferences
=seasonal
• Expectation (in future prices)
=change in price
•Market Size
•Price of related good and services (substitutes and compliments)
DIAGRAM OF CHANGES IN DEMAND
Changes In Supply
"Producer's intention is to have profit. The lesser the cost, the higher the profit.
More production, the higher the profit."
•Technology
=machine makes easier the production that makes supply increases
•Input Prices
= if cost goes down, makes produce more
• Expectation (in future prices)
• Number of producers
• Price of related goods and services (Substitutes and compliments)
DIAGRAM OF CHANGES IN SUPPLY