Supply and Demand Price (S per unit The demand curve slopes downward demonstrating that consumers are willing to buy more at a lower price as the product becomes relatively cheaper and the consumer's real income Increases Quantity Chapter 2: The Basics of Supply and Demand Slide 16
Chapter 2: The Basics of Supply and Demand Slide 16 Supply and Demand D The demand curve slopes downward demonstrating that consumers are willing to buy more at a lower price as the product becomes relatively cheaper and the consumer’s real income increases. Quantity Price ($ per unit)
Supply and Demand Non-price Determining variables of Demand e Income ● Consumer Tastes ● Price of related Goods ◆ Substitutes ◆ Complements Chapter 2: The Basics of Supply and Demand Slide 17
Chapter 2: The Basics of Supply and Demand Slide 17 Supply and Demand ◼ Non-price Determining Variables of Demand ⚫ Income ⚫ Consumer Tastes ⚫ Price of Related Goods ◆Substitutes ◆Complements
Supply and Demand Change in Demand ■| ncome Increases D At P,, produce Q e At P2, produce Q1 Demand Curve shifts right P1 More purchased at any price on D' than on D Q Chapter 2: The Basics of Supply and Demand Slide 18
Chapter 2: The Basics of Supply and Demand Slide 18 P D Q1 Q P2 Q0 P1 D’ Q2 Change in Demand Supply and Demand ◼ Income Increases ⚫ At P1 , produce Q2 ⚫ At P2 , produce Q1 ⚫ Demand Curve shifts right ⚫ More purchased at any price on D’ than on D
Shifts in Supply and Demand ■ Demand- A Review o Demand is determined by non-price demand-determining variables, such as income, price of related goods, and tastes o Changes in demand are shown by shifting the entire demand curve o Changes in quantity demanded are shown by movements along the demand curve Chapter 2: The Basics of Supply and Demand Slide 19
Chapter 2: The Basics of Supply and Demand Slide 19 Shifts in Supply and Demand ◼ Demand - A Review ⚫ Demand is determined by non-price demand-determining variables, such as, income, price of related goods, and tastes. ⚫ Changes in demand are shown by shifting the entire demand curve. ⚫ Changes in quantity demanded are shown by movements along the demand curve
The Market mechanism Price (s per unit The curves intersect at equilibrium, or market- clearing, price. At Po the quantity supplied is equal to the quantity demanded at Qo Quantity Chapter 2: The Basics of Supply and Demand Slide 20
Chapter 2: The Basics of Supply and Demand Slide 20 The Market Mechanism Quantity D S The curves intersect at equilibrium, or marketclearing, price. At P0 the quantity supplied is equal to the quantity demanded at Q0 . P0 Q0 Price ($ per unit)