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
- 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
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.
- 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