Supply *For Company*
-the quantities that producers or sellers are wiling and able to sell at various prices
Curve:
Law of Supply - there is a direct relationship bet. price and quant. Supplied (QS)(therefore ∆ in QS is caused by ∆ in price)
Determinants for ∆ in Supply
* ∆ in # of sellers
* ∆ in cost of production
* ∆ in tech.
* ∆ in weather
* ∆ in taxes or subsidies
* ∆ in expectations (future)
Cost of Production
ATC x Q
*TFC = AFC x Q
* TVC = AVC x Q
*ATC = AFC + AVC
TC / Q
*AFC = TFC / Q
*AVC = TVC / Q
*MC = New TC - Old TC
Demand*For buyers*
-the quantities that people are willing and able to buy at various prices
Law of Demand- there is an inverse relationship bet. price and quant. demanded (QD)(therefore ∆ in QDis caused by ∆ in price)
Determinants for ∆ in Supply
* ∆ in buyers' taste (advertisement)
* ∆ in # of buyers* ∆ in income
-buyers buy more normal goods when income ↑
-buyers buy less inferior goods when income ↑
* ∆ in price of related goods
-Substitute
goods that serve roughly the same purpose
-Complimentary
goods often consumed together
* ∆ in taxes or subsidies
* ∆ in expectations (future)
Elasticity of Demand
-the quantities that producers or sellers are wiling and able to sell at various prices
Curve:
| Schedule: Price ↑ Quantity ↑ Price ↓ Quantity ↓ *Plot ONLY points given * ↑ supply - curve shifts right * ↓Supply - curve shifts left |
Determinants for ∆ in Supply
* ∆ in # of sellers
* ∆ in cost of production
* ∆ in tech.
* ∆ in weather
* ∆ in taxes or subsidies
* ∆ in expectations (future)
Cost of Production
Total Revenue: P x Q (Price X Quantity)
Fixed Cost: A cost that does NOT change no
matter how much of a good is being produced
(Ex: Mortgage,
Insurance, Salary)
Variable Cost: Cost that rises and falls depending upon how
much is produced ]
(Ex: electricity)
Marginal Cost: cost of producing one more
additional of a good
Revenue - you receive
Cost - you send
Formulas:
*TC = TFC + TVCATC x Q
*TFC = AFC x Q
* TVC = AVC x Q
*ATC = AFC + AVC
TC / Q
*AFC = TFC / Q
*AVC = TVC / Q
*MC = New TC - Old TC
Price Floor
-legal min. meant to
help seller
-keep product prices
from falling
Ex: Minimum wage
consequences
-higher product
prices
-surplus
-higher taxes
-waste
Demand*For buyers*
-the quantities that people are willing and able to buy at various prices
 |
| Schedule: Price ↑ Quantity ↓ Price ↓ Quantity ↑ *Plot ONLY points given * ↑ supply - curve shifts right * ↓Supply - curve shifts left |
Determinants for ∆ in Supply
* ∆ in buyers' taste (advertisement)
* ∆ in # of buyers* ∆ in income
-buyers buy more normal goods when income ↑
-buyers buy less inferior goods when income ↑
* ∆ in price of related goods
-Substitute
goods that serve roughly the same purpose
-Complimentary
goods often consumed together
* ∆ in taxes or subsidies
* ∆ in expectations (future)
Elasticity of Demand
_measure of how consumers react to ∆ in price
Elastic Demand >1
- want, many
substitutes
ex: fur coat, soda, steak
- demand that is very sensitive to ∆ in price
Inelastic Demand
<1
-demand that is NOT very sensitive to ∆ in price
Needs, few or no
substitutes
Ex: Gas, milk,
insulin, soap
Unit(ary) Elastic
=1
Calculating Elasticity of Demand
Step 1: ∆ Quantity = New - Old
Old
Step 2: ∆ Price = New - Old
Old
Step 3: PED = ∆ of quantity
∆ of price
Price Ceiling
In addition to this, an easy way to remember demand is that in most cases as prices of goods increase, people lose interest therefore the quantity demanded is reduced and vice versa. People do not want to buy goods that are expensive and would definitely look for an alternative good.
ReplyDeleteThe definition to substitute goods is - they are goods that serve roughly the same purpose. Ex: with the meats, say they are increasing the prices of beef, and you don't want to buy anything that expensive you can buy chicken instead and it will serve the same purpose.
ReplyDeleteMy blog isn't complete yet, but thanks
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