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Section 2
SUPPLY AND DEMAND
Supply
Demand
Equilibrium
Efficiency of markets
Changes in equilibrium
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Supply and Demand, Schemes and Mind Maps of Macroeconomics
A comprehensive overview of the concepts of supply and demand in economics. It covers the definition of demand, the law of demand, factors impacting demand, the representation of demand, the definition of supply, the law of supply, determinants of supply, and the concept of market equilibrium. The document also discusses changes in equilibrium and the efficiency of markets, including the concepts of consumer surplus and producer surplus. The detailed explanations, examples, and illustrations make this document a valuable resource for understanding the fundamental principles of supply and demand and their applications in economic analysis.
Typology: Schemes and Mind Maps
2022/2023
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Section 2
SUPPLY AND DEMAND
Supply
Demand
Equilibrium
Efficiency of markets
Changes in equilibrium
DEMAND
Representing demand Demand schedule Demand curve Demand function A linear demand Price function: (dollars per bottle) Quantity (bottles per day) A 2.00 0 B 1.50 1 C 1.00 2 D 0.50 3
Law of demand
Law of demand
A change in price
causes a movement
along demand curve
Factors impacting on demand Movement along the demand curve Price (P) Income (I) Shifts the demand curve Price of related goods ( Number of buyers () Tastes (T) Expectations (E)
Income (I)
Normal goods
shift to the right) shift to the left)
Inferior goods
shift to the right) Normal good D 1 Q D 3 D 2 P An increase in income causes an increase in demand A decrease in income causes a decrease in demand
Factors impacting on demand
Market size Number of buyers
Tastes Preferences
Expectations
ie. Expectation of income,
price
QuickQuiz
Supply
Supply the amount of a good that sellers are
willing and able to sell across a range of prices ,
ceteris paribus
Supply S^ Price P
Quantity supplied QS
Quantity supplied the amount of a good that
sellers are willing and able to sell at a specified
price
Notations:
14 Representing supply Supply schedule Supply curve Supply function
Price (dollars per bottle) Quantity (thousands of bottles per day) (^0 1 2 3 ) Supply Curve D C B A Supply function: A linear supply function: Price (dollars per bottle) Quantity supplied (thousands of bottles per day) A 2.00 3 B 1.50 2 C 1.00 1 D 0.50 0
Market supply
Market supply is the horizontal summing of
individual supply
Price (^) Nam’s QS^ Ha’s QS^ Market QS
Determinants of supply P Q A shift A movement along Technology A shift in supply Input prices Tax and subsidy Number of sellers Expectations
Number of sellers (Ns) Price Quantity supplied 𝑆 3 𝑆 1 𝑆 2 Decrease in Increase in
Quickquiz