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September 17th.docx

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McGill University
Management Core
MGCR 293
Tariq Nizami

September 17 th Supply & Demand - Shift in Demand – any of non-price determinants change (e.g. income, tastes & preferences, population, expectations, price of related goods, etc.) o Whole curve shifts right or leftward. o Increase in demand means the curve shifts rightward, or an increase in quantity demanded at EVERY price - Different from change in quantity demanded. o A change in a good’s own price leads to a change in quantity demanded  a move along the same demand curve Supply - The different quantities of a good or service sellers are willing and able to supply at various prices during a specified period of time, holding all non-price determinants (e.g. input prices, productivity, technology, taxes & subsidies, number of firms in the industry, price expectations, etc.) constant. - Law of Supply: o The price of a product or service and the quantity supplied are directly related. As price goes up, the quantity supplied increases, and vice versa. - Market Supply Schedule o Sharing a list of possible products, prices, and corresponding quantities supplied by all firms Market Demand Schedule Market Supply Schedule P Q P Q 5 20 5 100 4 40 4 80 3 60 3 60 2 80 2 40 1 100 1 20 - Non-price determinants: cost of inputs (capital, land, labour), technology & productivity, taxes & subsidies, number of firms in the industry, price expectations - Change in supply vs. change in quantity supplied – refer to demand. Equilibrium price: - Price at which quantity demanded of a product equals the quantity supplied. Occurs at intersection of two curves. - Surplus – market situation at which quantity supplied exceeds quantity demanded o Downward pressure on price - Shortage – when quantity demanded exceeds quantity supplied o Upward pressure on price September 19 th APPEN
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