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SECTION TOW Presented by MOHAMED ABD-ELMOHSEN Assistant lecture Economic Department.

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Presentation on theme: "SECTION TOW Presented by MOHAMED ABD-ELMOHSEN Assistant lecture Economic Department."— Presentation transcript:

1 SECTION TOW Presented by MOHAMED ABD-ELMOHSEN Assistant lecture Economic Department

2 Out line We will review chapter three such as: 1-law of Demand 2- the different between change in demand(shift) & change in quantity of demand 3- law of supply 4 - the different between change in supply (shift) & change in quantity of supply 5 - Market Equilibrium

3 1- What is the different between change in demand & change of Quantity of demand ? Change in demand (shift)Change in quantity of demand The reason : change in other factor, price The reason : change in price 1.The prices of other goods Substitute of CD demand (increases) Complement demand(decrease ) 2. Expected future prices, (direct) 3. Income, (direct) 4. Population, and (direct) 5. Preference The law of demand states: Other things remaining the same, the higher the price of a good, the smaller is the quantity demanded.

4 2- some important Definition DefinitionExplanation normal goodis one for which demand increases as income increases inferior goodis a good for which demand decreases as income increases. Substitute good is a good that can be used in place of another good. (coffee& tea- PC & Lap- Complement good is a good that is used in conjunction with another good. ( CD& PC- SUGER& tea- )

5 3 - What is the different between change in demand & change of Quantity of demand ? Change in supply (shift)Change in the quantity of supply When one of the other factors that influence selling plans changes, there is a change in supply and a shift of the supply curve Such as 1- Prices of productive resources 2- Prices of related goods produced 3-Expected future prices 4- The number of suppliers 5- Technology When the price of the good changes and other influences on selling plans remain the same, there is a change in the quantity supplied and a movement along the supply curve. 1- only price

6 4:Use graph to explain Market equilibrium: This Graph illustrates the Market Equilibrium 1- about star point(Intersection) QD= QS 2- above this point there is a surplus QS< QD 3- under this point there is a shortage QS > QD This Graph illustrates the Market Equilibrium 1- about star point(Intersection) QD= QS 2- above this point there is a surplus QS< QD 3- under this point there is a shortage QS > QD P QD surplus QS Equilibrium shortage Demand & supply

7 5- Assume the following market model: QD1990 = 1600 – 125P QD1991 = 1200 – 125P QD1992 = 1800 – 125P QS1990-1992 = 440 + 165P Calculate equilibrium prices and equilibrium quantities in 1990, 1991 and 1992.

8 5- Calculate equilibrium prices and equilibrium quantities in 1990, 1991 and 1992. QD1990 = QS1990 1600 – 125P = 440 + 165P 1600- 440 = 165p +125p 1160=290p p= 4 Compensation in: QD1990 = 1600 –125P So QD1990= 1100 QD1991 = QS1991 1200 – 125P= 440 + 165P 1200-440= 165p+125p 760= 290p P= 2.6 Compensation in: QD1991 = 1200 – 125P QD1991= 872.4 QD1991 = QS1991 1200 – 125P= 440 + 165P 1200-440= 165p+125p 760= 290p P= 2.6 Compensation in: QD1991 = 1200 – 125P QD1991= 872.4

9 Cont….. QD1992 = QS1992 1800 – 125P = 440 + 165P 1360= 290p P=4.6 Compensation in: QD1992= 1800 – 125P QD1992= 1225

10 6- The table sets out the demand and supply schedules for tomato: Price (cent per crate) Quantity demanded (Million) Quantity supplied (Million) 50 160130 60 150140 70 140150 80 130160 90 120170 100110180 a.Draw a graph of the tomato market and mark in the equilibrium price and quantity b.If the price is 50 cents a crate, is there a shortage or a surplus, and how does the price adjust? c.If the quantity of tomato that people want to buy increased by 40 million crates per week at each price, how does the demand of tomato change? Explain? d.If a virus destroys tomato and the quantity of tomato produced decreases by 30 million crate a week at each price, how does the supply of tomato changes? Explain?

11 6( a&)- Draw a graph of the tomato market and mark in the equilibrium price and quantity ? 6(B)- If the price is 50 cents acrate, isthere a shortage or a surplus, and how does the price adjust? We note from this chart Equilibrium price = 65 Equilibrium Quantity=145 B)if P = 50, Its shortages about 30 millions

12 6(C) - If the quantity of tomato that people want to buy increased by 40 million crates per week at each price, how does the demand of tomato change? Explain Price = 85, Q= 165 Price (cent per crate) Quantity demanded (Million) Quantity supplied (Million) NEW DEMAN D 50160130 200 60150140 190 70140150 180 80130160 170 90120170 160 100110180 150

13 6(D)If a virus destroys tomato and the quantity of tomato produced decreases by 30 million crate a week at each price, how does the supply of tomato changes? Explain? Price = 80, Q= 130 Price (cent per crate) Quantity demande d (Million) Quantity supplied (Million) NEW SUPPLY 50160130 100 60150140 110 70140150 120 80130160 130 90120170 140 100110180 150


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