Supply and Demand
!
JWI 515
Managerial Economics
!
!
Week Two | Lecture One
Please note that this basic version of the lecture is provided as a convenience for the student, and may be missing interactive materials throughout. Students are still responsible for reviewing the missing materials - including audio, video, and interactive widgets - that are found in the full lecture.
- Page 1
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SUPPLY AND DEMAND: GET YOUR
OUTPUT IN ORDER
!
Another essential component of good managerial decision making is having a thorough understanding of the relationship between prices and output. For that, supply and demand curves are helpful.
Demand is the quantity of a good or service that a consumer is willing and able to purchase at a specific point in time and at a specific price. The demand curve reflects an inverse relationship between the price of the product and the quantity demanded of the product. A movement along this curve results from a change in the price of the product. As the price of an iPhone falls, for instance, demand increases for the cheaper product. In economic terms, this is referred to as a change in the quantity demanded (see Figure 1).
- Page 2
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Figure 1. Change in the quantity demanded.
A change in demand, or more easily remembered as a shift in demand, results from a change in the forces that drive demand.
These include the number of buyers in the market, consumer tastes and preferences, consumer income, the price of related goods, and consumer expectations. Figure 2 shows a positive shift in the demand curve due to favorable changes in the factors that determine demand, except the price of the product. The quantity demanded increases at given prices. The curve can also shift in the opposite direction as the forces of demand cause the quantity to decrease. - Page 3
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Figure 2. Positive shift in demand.
Ceteris paribus means “all other factors being constant or equal.” There are many factors that affect demand for a product.
Consequently, it is difficult,
JWI 515
Managerial Economics
!
!
Week Two | Lecture One
Please note that this basic version of the lecture is provided as a convenience for the student, and may be missing interactive materials throughout. Students are still responsible for reviewing the missing materials - including audio, video, and interactive widgets - that are found in the full lecture.
- Page 1
-
SUPPLY AND DEMAND: GET YOUR
OUTPUT IN ORDER
!
Another essential component of good managerial decision making is having a thorough understanding of the relationship between prices and output. For that, supply and demand curves are helpful.
Demand is the quantity of a good or service that a consumer is willing and able to purchase at a specific point in time and at a specific price. The demand curve reflects an inverse relationship between the price of the product and the quantity demanded of the product. A movement along this curve results from a change in the price of the product. As the price of an iPhone falls, for instance, demand increases for the cheaper product. In economic terms, this is referred to as a change in the quantity demanded (see Figure 1).
- Page 2
-
Figure 1. Change in the quantity demanded.
A change in demand, or more easily remembered as a shift in demand, results from a change in the forces that drive demand.
These include the number of buyers in the market, consumer tastes and preferences, consumer income, the price of related goods, and consumer expectations. Figure 2 shows a positive shift in the demand curve due to favorable changes in the factors that determine demand, except the price of the product. The quantity demanded increases at given prices. The curve can also shift in the opposite direction as the forces of demand cause the quantity to decrease. - Page 3
-
Figure 2. Positive shift in demand.
Ceteris paribus means “all other factors being constant or equal.” There are many factors that affect demand for a product.
Consequently, it is difficult,