1. Supply and Demand

2. Demand Schedule
Price QTY $ $ $ $ $ $ $ $ $ $
Supply schedule .
Price QTY $ $ $ $ $ $ $ $ $

3. What is the purpose of supply and demand?
Rationing of goods and services
The determination of wages.
Assignment of limited resources.

4. Laws of Supply and Demand
What is the demand ?
Buying a Good or Service as a certain price
What is the law of demand ?
If nothing else changes, consumers will have a greater demand of a good or service at a price lower than a higher price.
What is Supply?
The amount a company is willing to provide a good or service a certain price.
What is the law of supply?
If nothing else changes, a company will supply a good or service in a larger amount, a higher price instead of a lower price.

5. Determinants of Demand
Price of other goods (substitute or complementary)
Expectations (consumer expectations of future incomes and prices)
Revenue (normal goods versus substandard products)
Number of potential customers (market population)

6. Determinants of Supply
Productivity (Improvements in machines and production processes of a good or service)
Inputs (Change in the price of the inputs needed to produce the good or service).
Government actions (subsidies, taxes and regulations)
Technology (Improvements in the machines and production processes of a good or service)
Expectations (perspective of future prices and profits)
Size of Industry (Number of companies in the industry)

7. Demand Curve for Xbox 1/ PS4
$500 B
$450
Price per XBox C
400 E
350 F
300 G
250 H
200 45 50 55 60 65 70 75
Quantity Demanded
in Billions of Xboxes per Year

8. Supply Curve for XBOX 1/PS4a
$500 S b
450 c
400 e
350
Price per Xbox f
300 g
250 h
200 30 40 50 60 70 80 90
Quantity Supplied
in Billions of Xboxes per Year

9. Supply-Demand Market Equilibrium
$500
450
400 E
Price per xbox 360
350
300 g G
250
200 30 40 50 60 70 80 90
Quantity
in Billions of Xbox 1/PS 4 per Year

10. Equilibrium
Equilibrium: when supply and demand are equal. In equilibrium, there is no change in price.
Shortage or excess demand: when demand is high, but supply is low, therefore, price increases.
Surplus or excess supply: when the demand is low, but the supply is high, so the price decreases.

11. Changes in Equilibrium
Increase in demand leads to higher equilibrium price and higher equilibrium quantity.
Increase in supply leads to lower equilibrium price and higher equilibrium quantity.

12. Changes in Equilibrium
Decrease in demand leads to lower price and lower quantity exchanged.
Decrease in supply leads to higher price and lower quantity exchanged.