Analyzing Market Demand, Supply, and Equilibrium PDF

ANALYZING MARKET DEMAND, SUPPLY AND EQULIBRIUM MODULE 3:WEEK 3  Labor Supply – in mainstream economic theories, the labor supply is the total hours (adjusted for intensity of effort) that workers wish to work at a given real wage rate.  MARKET DEMAND The amount of good and...

ANALYZING MARKET DEMAND, SUPPLY AND EQULIBRIUM MODULE 3:WEEK 3  Labor Supply – in mainstream economic theories, the labor supply is the total hours (adjusted for intensity of effort) that workers wish to work at a given real wage rate.  MARKET DEMAND The amount of good and services consumers are willing to purchase at each price. If customers cannot pay for it, there is no effective demand  PRICE Is what a buyer pays for a unit of the specific goods and services.  QUANTITY DEMAND The total number of units purchased at the specific price.  LAW OF DEMAND If all factors remain equal the higher the price of a good, the fewer people will demand that good. The consumers can buy more good when its price decrease and less when the price increases The price and the number of demand are indirectly proportional.  DEMAND CURVE graph The amount of a good the buyers purchase at a higher price is fewer because as the price goes up, the opportunity cot of buying the good is also less. Consumers will avoid buying a product. The demand curve is always DONWARD SLOPING due to the law of diminishing marginal utility.  FACTORS AFFECTING DEMAND 1. Income of buyers 2. Number of potential buyers 3. Preferences 4. Complementary products  MARKET SUPPLY The amount of product that is offered for sale at all possible prices in the market.  LAW OF SUPPLY Tendency of suppliers to offer more of a good at a higher price and less at a lower prices. The higher the price, the higher the quantity supplied and vice versa. Price and the number of supply are always directly proportional.  SUPPLY CURVE GRAPH Producers supply more at a higher price because selling at a higher quantity at a higher price increases revenue. As the price of a product increases, companies will produce more of the product.  MARKET EQUILIBRIUM Equilibrium Price or Market Clearing Price – is the price at which the producer can sell all the units he wants to produce and the buyers can buy all the units he wants.  EQUILIBRIUM In the equilibrium point, GRAPH the two slopes will intersect. The market price is sufficient to induce suppliers to bring to market that same quality of goods that consumers will be willing Equilibrium to pay for at Market – is a that price. state wherein demand is equal to supply. This is an implicit agreement of how much buyers and sellers are willing to transact to each other.  DISEQUILIBRIUM AND SHIFTS In a market (free market) economy, disequilibrium happens when supply and demand are not equal. This imbalance of the two creates disequilibrium prices, surpluses, and shortages. Insert graph supply shifts and demand shifts