Jackie Robbins Escola de Llengües Universitat Oberta de Catalunya.
Unit 5. The market: Supply and Demand IES Lluís de Requesens (Molins de Rei) Batxillerat Social...
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Transcript of Unit 5. The market: Supply and Demand IES Lluís de Requesens (Molins de Rei) Batxillerat Social...
![Page 1: Unit 5. The market: Supply and Demand IES Lluís de Requesens (Molins de Rei) Batxillerat Social Economics (CLIL) – Innovació en Llengües Estrangeres Jordi.](https://reader036.fdocuments.us/reader036/viewer/2022062417/55198fa155034643068b4598/html5/thumbnails/1.jpg)
Unit 5. The market: Supply and Demand
IES Lluís de Requesens (Molins de Rei)Batxillerat SocialEconomics (CLIL) – Innovació en Llengües EstrangeresJordi Franch Parella
![Page 2: Unit 5. The market: Supply and Demand IES Lluís de Requesens (Molins de Rei) Batxillerat Social Economics (CLIL) – Innovació en Llengües Estrangeres Jordi.](https://reader036.fdocuments.us/reader036/viewer/2022062417/55198fa155034643068b4598/html5/thumbnails/2.jpg)
Supply and demand are the words most used by economists
Supply and demand are the forces that make market economies work
Microeconomics is about supply, demand and market equilibrium
![Page 3: Unit 5. The market: Supply and Demand IES Lluís de Requesens (Molins de Rei) Batxillerat Social Economics (CLIL) – Innovació en Llengües Estrangeres Jordi.](https://reader036.fdocuments.us/reader036/viewer/2022062417/55198fa155034643068b4598/html5/thumbnails/3.jpg)
Markets and Comptetion A market is a group of buyers and sellers of a
particular group or service The terms supply and demand refer to the
behaviour of people as they interact with one another in markets.
![Page 4: Unit 5. The market: Supply and Demand IES Lluís de Requesens (Molins de Rei) Batxillerat Social Economics (CLIL) – Innovació en Llengües Estrangeres Jordi.](https://reader036.fdocuments.us/reader036/viewer/2022062417/55198fa155034643068b4598/html5/thumbnails/4.jpg)
Markets and Competition
Buyers determine demand Sellers determine supply
![Page 5: Unit 5. The market: Supply and Demand IES Lluís de Requesens (Molins de Rei) Batxillerat Social Economics (CLIL) – Innovació en Llengües Estrangeres Jordi.](https://reader036.fdocuments.us/reader036/viewer/2022062417/55198fa155034643068b4598/html5/thumbnails/5.jpg)
Demand Quantity demanded is the amount of a good
that buyers are willing and able to purchase Law of Demand
The law of demand states that, other things equal, the quantity demanded of a good falls when the price of the good rises
Demand Schedule The demand schedule is a table that shows the
relationship between the price of the good and the quantity demanded
![Page 6: Unit 5. The market: Supply and Demand IES Lluís de Requesens (Molins de Rei) Batxillerat Social Economics (CLIL) – Innovació en Llengües Estrangeres Jordi.](https://reader036.fdocuments.us/reader036/viewer/2022062417/55198fa155034643068b4598/html5/thumbnails/6.jpg)
Demand Curve
![Page 7: Unit 5. The market: Supply and Demand IES Lluís de Requesens (Molins de Rei) Batxillerat Social Economics (CLIL) – Innovació en Llengües Estrangeres Jordi.](https://reader036.fdocuments.us/reader036/viewer/2022062417/55198fa155034643068b4598/html5/thumbnails/7.jpg)
Supply
Quantity supplied is the amount of a good that sellers are willing and able to sell
The law of supply states that, other things equal, the quantity supplied of a good rises
when the price of the good risesThe supply schedule is a table that shows
the relationship between the price of the good and the quantity supplied
![Page 8: Unit 5. The market: Supply and Demand IES Lluís de Requesens (Molins de Rei) Batxillerat Social Economics (CLIL) – Innovació en Llengües Estrangeres Jordi.](https://reader036.fdocuments.us/reader036/viewer/2022062417/55198fa155034643068b4598/html5/thumbnails/8.jpg)
Supply Curve
![Page 9: Unit 5. The market: Supply and Demand IES Lluís de Requesens (Molins de Rei) Batxillerat Social Economics (CLIL) – Innovació en Llengües Estrangeres Jordi.](https://reader036.fdocuments.us/reader036/viewer/2022062417/55198fa155034643068b4598/html5/thumbnails/9.jpg)
Equilibrium in the Market Equilibrium in the
market is when demand meets supply
The plan of consumers match the plans of suppliers
There is no tendency for change to occur
![Page 10: Unit 5. The market: Supply and Demand IES Lluís de Requesens (Molins de Rei) Batxillerat Social Economics (CLIL) – Innovació en Llengües Estrangeres Jordi.](https://reader036.fdocuments.us/reader036/viewer/2022062417/55198fa155034643068b4598/html5/thumbnails/10.jpg)
Market intervention
- When policymakers believe that the market price is unfair, then it results in government created price-ceiling and price-floors
- A price-floor is a legal minimum price (above the equilibrium price) at which a good can be sold.
- Price-ceiling if a legal maximum price (below the equilibrium price) at which a good can be sold
![Page 11: Unit 5. The market: Supply and Demand IES Lluís de Requesens (Molins de Rei) Batxillerat Social Economics (CLIL) – Innovació en Llengües Estrangeres Jordi.](https://reader036.fdocuments.us/reader036/viewer/2022062417/55198fa155034643068b4598/html5/thumbnails/11.jpg)
A price-floor creates surpluses(examples: minimum wage, PAC ...)
![Page 12: Unit 5. The market: Supply and Demand IES Lluís de Requesens (Molins de Rei) Batxillerat Social Economics (CLIL) – Innovació en Llengües Estrangeres Jordi.](https://reader036.fdocuments.us/reader036/viewer/2022062417/55198fa155034643068b4598/html5/thumbnails/12.jpg)
A ceiling-floor creates shortages(examples: rent controls)
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Elasticity
Elasticity is a measure of how much buyers and sellers respond to changes in market conditions
Price elasticity of demand is the percentage change in quantity demanded given a percent change in price and is a measure of how much the quantity demanded of a good responds to a change in the price of that good
Price elasticity of demand = Percentage change in quantity demanded / Percentage change in price
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Example of computing the price elasticity of demand
If the price of a CD falls from 1 € to 0,8 € and the quantity demanded rises from 10 Cds to 15 Cds, the price elasticity of demand is:
Elasticity = (15 – 10) / 10 : (0,8 – 1) / 1 = 2,5 The demand is elastic (greater than one), as a
change in the price of 20% causes a change in the quantity demanded of 50% (quantity demanded responds strongly to changes in price)
The demand will be inelastic (less than one) when demand does not respond strongly to changes in price
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Different elasticities
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Results of different elasticities
- Price elasticity of demand measures how much the quantity demanded responds to changes in the price
- If the demand is elastic, total revenue falls when the price rises and total revenue rises when the price falls
- If the demand is inelastic, total revenue rises when the price rises and total revenue falls when the price falls
![Page 17: Unit 5. The market: Supply and Demand IES Lluís de Requesens (Molins de Rei) Batxillerat Social Economics (CLIL) – Innovació en Llengües Estrangeres Jordi.](https://reader036.fdocuments.us/reader036/viewer/2022062417/55198fa155034643068b4598/html5/thumbnails/17.jpg)
Income elasticity
- Income elasticity of demand = Percentage change in quantity demanded / Percentage change in income
- Types of goods: normal goods (higher income raises the quantity demanded) and inferior goods (higher income lowers the quantity demanded)
- Necessities tend to be income inelastic (food, clothing, medical services, fuel ...)
- Luxuries tend to be income elastic (furs, sport cars, exotic foods ...)