Unit 1: Demand and supply

        1/09/17                                                          Demand and Supply  

• Demand- the quantity's that people are willing and able to buy at various prices.
• The law of demand- there is an inverse relationship between price and quantity demanded.

What causes a " change in quantity demanded"?

1. Change in number of buyers ( population)
2. Change in buyers taste ( preferences, advertisements)
3. Change in income 

- Normal goods- an increase in income causes an increase in dema
nd.
- Inferior goods- increase in income that causes a fall in demand.
     4. Change in price of related goods
- substitute good
- complementary good
     5. Change in expectation (future)

• Supply-  the quantities that producers or sellers are willing and able to produce and sell at various prices.
• The law of supply- there is a direct relationship between price and quantity supply.

What causes a " change in quantity supplied "?
                                              (Heres a link elaborating on the determinants of supply and demand)

1. Change in technology                     https://www.youtube.com/watch?v=jtypT1Ql2RY
2. Change in cost of production 
3. Change in weather
4. Change in number of sellers
5. Change taxes, subsides 
6. Change in expectations (future) 

1/12/17

Calculating Quantity and Price 

• Quantity = new quantity- old quantity/ old quantity 
• Price = new price- old price/ old price 
• Total revenue= price•quantity 

1/13/17

Calculating Supply 

• TVC+TVC=TC
• AFC+AVC=ATC
• TFC/Q=AFC
• TVC/Q=AVC
• TC/Q=ATC
• New TC-Old TC= MC

1/20/17

Excess Demand and  Excess Supply 

• Equilibrium-  Point at which the supply curve and demand curve intersect
• Excess demand-  occurs when the quantity demanded is greater than the quantity supplied (results in a shortage)
• Shortage-  when consumers can't get enough of the quantity  they desire .
• Price ceiling- this creates a shortage, it occurs when the government puts a legal limit on how high the price of a product can be. Ex: the government putting a price ceiling on flu shots 
• Excess supply -  when the quantity supply is greater than the quantity demanded creates a surplus.
• Price floor- lowest legal price a commodity can be sold at, this is usually used by the government in order to prevent prices from becoming to low . Ex: Minimum wage