1. Putting Supply and Demand together
Combine the supply curve and the demand curve and we can find a market price

2. Market Equilibrium: the intersection of the supply and demand curves
Market Equilibrium: the intersection of the supply and demand curves. This should be the market price/quantity. If it is not, then supply, demand, and price will all move towards the equilibrium point.

3. This price is above equilibrium (to high) it should work towards the EQ

4. This price is below equilibrium (to low) it should work towards the EQ

5. Surplus: when supply exceeds demand, prices will naturally fall.

6. Shortage: when demand exceeds supply, prices will naturally rise.

7. All the mechanics of Demand and Supply still are in effect…now we are just putting the two together. SO…………………

8. Any change in the price of the product DOES NOT shift (move) either curve! This is a change in QUANTITY supplied and QUANTITY demanded

9. All the reasons I gave you (non-price determinants) will shift the curves…increase shift curves to the right and decrease shift curves to left…

10. Changes in SUPPLY

11. Changes in DEMAND

12. Shifting Demand

13. Shifting Supply

14. Price Floor

15. Price Ceilings

16. What are Market Failures?
When a market partially forms
Markets are present but very limited
When free markets fail to develop
Markets are created but do not spread out to meet increasing demand
When markets fail to allocate resources efficiently
The company or market itself collapses

17. Types of Market Failures
Market Inefficiency
Monopolies
Missing/Incomplete Markets
Negative Externalities
Property Rights
Unstable Markets
Inequality

18. Market Inefficiency
Markets fail to allocate resources in an inefficient manner.
Firms wasting resources
New business comes in and tries to under cut the competition

19. Monopolies
Control of a market by one firm, two firms (duopoly) or a small group (oligopoly)
Can cause unfair practices and prices driving buyers and competition out of the market
Google?
Google owns about 67% of the global search market
Google search, Google Earth, Google Blogger, Google Translate, Google Docs, Google Calendar, Google Sites, Gmail, Google Plus, and since 2006, Youtube.

20. Missing/Incomplete Markets
Markets fail to form or partially form
Most cases the government supplies these
Public Goods such street lights, bridges, public schools
Not profitable enough to attract sellers

21. Negative Externalities
The negative cost incurred by third parties as a result of a market transaction
Pollution (environmental and noise)
Usually regulation will follow to lower the cost of the externality
Sun Chips biodegradable bag…

22. Property Rights
When the market utilizes resources that are not private property
Can result in a lack of resources or conflict that make it inefficient
Mining in public areas or on water
International fishing

23. Unstable Market
Market instability usually due to external factors or tastes
Food would be one without Subsidies/ Price Floors/ etc.
Swai/Basa , Vietnamese catfish

24. Inequality
Markets may have a higher income target consumer and thus limit growth based on income gap
Creation of a new watch at $250,000 a unit

25. Supply Elasticity

26. Elasticity of supply is mostly based on time
How quickly can producers adjust to changes in demand
Can you think of any examples of something that the supply is inelastic?
Can you think of a product that is perfectly elastic?
Why do producers need time to react to market changes?

27. Elasticity
This is a measurement of how responsive we are to changes in price.

28. Unit Elastic
When % change in demand is about the same as % change in price.

29. Elastic products
This means that a change in price will create a significant change in demand
% change in demand > % change in price

30. Inelastic products
Change in price yields little to no response change in demand.
% change in demand < % change in price