1. SUPPLY and DEMAND The basic model of market economics

2. Demand Schedule

3. Demand Curve $3.00 2.50 2.00 1.50 1.00 0.50 213456789101211 $/unit Units/week 单位 / 周 0

4. Determinants of Demand Market price Consumer income Prices of related goods Tastes Expectations

5. Movements along the demand curve 0 D1D1 $/unit units/week A C 8 1.00 $2.00 4

6. Shifts in the demand curve 0 D1D1 $/unit units/week D3D3 D2D2 Increase in demand Decrease in demand Q2Q1Q3 P

7. Tilts in the demand curve (change in slope) 0 D1D1 $/unit Units /week D2D2 Pa Pb QaQbQa Qb The flatter the demand curve, the greater the change in quantity for a change in price

8. Supply Schedule

9. Supply Curve $3.00 2.50 2.00 1.50 1.00 0.50 213456789101211 $/unit units/wk 0

10. Determinants of Supply Market price Input prices Technology Expectations Number of producers

11. Movements along the supply curve 1 5 $/unit (units/wk) 0 S 1.00 A C $3.00

12. Shifts in the Supply Curve $/unit units/wk 0 S S2S2 Decrease in Supply S1S1 Increase in Supply

13. Tilts in the Supply Curve $/unit units/wk 0 S2S2 S1S1

14. Supply and Demand Together Demand Schedule (all buyers)Supply Schedule (all sellers) At $2.00, the quantity demanded is equal to the quantity supplied!

15. Supply Demand $/unit units/wk Market Equilibrium 2134567891012110 $3.00 2.50 2.00 1.50 1.00 0.50 Equilibrium

16. $/unit (units/wk) 2134567891012110 $3.00 2.50 P*= 2.00 1.50 1.00 0.50 Supply Demand Surplus Market Not in Equilibrium: P > P *  Surplus (Excess Supply) Equilibrium Qd Qs

17. $/unit (units/wk) 2134567891012110 $3.00 2.50 P*= 2.00 1.50 1.00 0.50 Supply Demand Shortage Market Not in Equilibrium: P < P *  Shortage (Excess Demand) Equilibrium QdQs