1. Supply & Demand Analysis
PART A
Agricultural Marketing
Agricultural Economics 364
Joey E. Mehlhorn, Ph.D.

2. Changes in Demand & Supply Curves
The demand and supply curves show the responses of buyers and sellers to changes in prices, everything else being equal. These curves can shift in position—a change in demand or a change in supply.

3. Factors That Shift Demand Curves:
Change in the number of buyers.
Change in incomes or purchasing power.
Change in tastes and preferences.

4. Factors That Shift Demand Curves:
Change in the prices of related products.
Change in expectations of buyers as to future levels of prices.
Changes in marketing costs, shifting derived demand.

5. Factors That Shift the Supply Curve:
Short-run:
Storage costs.
Change in financial conditions.
Expectations about future prices.

6. Factors That Shift the Supply Curve:
Long-run:
Costs of production.
Relative prices.
Technology.

7. Elasticity
Buyers and sellers often want to know by how much will quantity respond to changes in price.
Price elasticity is a measure of the responsiveness of quantity supplied or demanded to changes in price.

8. Elasticity

9. Elasticity Ep > |1|  Elastic Ep = |1|  Unitary
Ep < |1|  Inelastic

10. Elastic
A 10% change in the price leads to a greater than 10% change in the quantity supplied or demanded.
Example: E(demand)=-1.23
A 10% increase in the price would lead to a 12.3% decrease in the quantity demanded.

11. Unitary Elasticity
A 10% change in the price leads to a 10% change in the quantity supplied or demanded.
Example: E(supply)=1.00
A 10% increase in the price would lead to a 10% increase in the quantity supplied.

12. Inelastic
A 10% change in the price would lead to a less than 10% change in the quantity supplied or demanded.
Example: E(demand)=-0.27
A 10% increase in price would lead to a 2.7% decrease in quantity demanded.