渥太华大学 微观经济 讲义ECO1104 3

nullChapter 4 The Market Forces of Supply and Demand Chapter 4 The Market Forces of Supply and Demand *Copyright © 2011 Nelson Education LimitedIn this chapter, look for the answers to these questions:In this chapter, look for the answers to these questions:What factors affect buyers’ demand for goods? What factors affect sellers’ supply of goods? How do supply and demand determine the price of a good and the quantity sold? How do changes in the factors that affect demand or supply affect the market price and quantity of a good? How do markets allocate resources? *Copyright © 2011 Nelson Education LimitedMarkets and CompetitionMarkets and CompetitionA market is a group of buyers and sellers of a particular product. A competitive market is one with many buyers and sellers, each has a negligible effect on price. In a perfectly competitive market: All goods exactly the same Buyers & sellers so numerous that no one can affect market price – each is a “price taker” In this chapter, we assume markets are perfectly competitive. 0*Copyright © 2011 Nelson Education LimitedDemandDemandThe quantity demanded of any good is the amount of the good that buyers are willing and able to purchase. Law of demand: the claim that the quantity demanded of a good falls when the price of the good rises, other things equal 0*Copyright © 2011 Nelson Education LimitedThe Demand ScheduleThe Demand ScheduleDemand schedule: a table that shows the relationship between the price of a good and the quantity demanded Example: Helen’s demand for lattes.Notice that Helen’s preferences obey the Law of Demand. 0*Copyright © 2011 Nelson Education LimitedHelen’s Demand Schedule & CurveHelen’s Demand Schedule & Curve0*Copyright © 2011 Nelson Education LimitedMarket Demand versus Individual DemandMarket Demand versus Individual DemandThe quantity demanded in the market is the sum of the quantities demanded by all buyers at each price. Suppose Helen and Ken are the only two buyers in the Latte market. (Qd = quantity demanded)Market Qd 0*Copyright © 2011 Nelson Education LimitedThe Market Demand Curve for LattesPQThe Market Demand Curve for Lattes0*Copyright © 2011 Nelson Education LimitedDemand Curve ShiftersDemand Curve ShiftersThe demand curve shows how price affects quantity demanded, other things being equal. These “other things” are non-price determinants of demand (i.e., things that determine buyers’ demand for a good, other than the good’s price). Changes in them shift the D curve… 0*Copyright © 2011 Nelson Education LimitedDemand Curve Shifters: # of BuyersDemand Curve Shifters: # of BuyersIncrease in # of buyers increases quantity demanded at each price, shifts D curve to the right. 0*Copyright © 2011 Nelson Education LimitedDemand Curve Shifters: # of BuyersSuppose the number of buyers increases. Then, at each P, Qd will increase (by 5 in this example).0Demand Curve Shifters: # of Buyers*Copyright © 2011 Nelson Education LimitedDemand Curve Shifters: IncomeDemand for a normal good is positively related to income. Increase in income causes increase in quantity demanded at each price, shifts D curve to the right. (Demand for an inferior good is negatively related to income. An increase in income shifts D curves for inferior goods to the left.) Demand Curve Shifters: Income0*Copyright © 2011 Nelson Education LimitedDemand Curve Shifters: Prices of Related GoodsTwo goods are substitutes if an increase in the price of one causes an increase in demand for the other. Example: pizza and hamburgers. An increase in the price of pizza increases demand for hamburgers, shifting hamburger demand curve to the right. Other examples: Coke and Pepsi, laptops and desktop computers, CDs and music downloads Demand Curve Shifters: Prices of Related Goods0*Copyright © 2011 Nelson Education LimitedDemand Curve Shifters: Prices of Related GoodsTwo goods are complements if an increase in the price of one causes a fall in demand for the other. Example: computers and software. If price of computers rises, people buy fewer computers, and therefore less software. Software demand curve shifts left. Other examples: college tuition and textbooks, bagels and cream cheese, eggs and baconDemand Curve Shifters: Prices of Related Goods0*Copyright © 2011 Nelson Education LimitedDemand Curve Shifters: TastesAnything that causes a shift in tastes toward a good will increase demand for that good and shift its D curve to the right. Example: The Atkins diet became popular in the ’90s, caused an increase in demand for eggs, shifted the egg demand curve to the right. Demand Curve Shifters: Tastes0*Copyright © 2011 Nelson Education LimitedDemand Curve Shifters: ExpectationsExpectations affect consumers’ buying decisions. Examples: If people expect their incomes to rise, their demand for meals at expensive restaurants may increase now. If the economy sours and people worry about their future job security, demand for new autos may fall now. Demand Curve Shifters: Expectations0*Copyright © 2011 Nelson Education LimitedSummary: Variables That Influence BuyersSummary: Variables That Influence BuyersVariable A change in this variable… Price …causes a movement along the D curve # of buyers …shifts the D curve Income …shifts the D curve Price of related goods …shifts the D curve Tastes …shifts the D curve Expectations …shifts the D curve0*Copyright © 2011 Nelson Education LimitedA C T I V E L E A R N I N G 1 Demand CurveA. The price of iPods falls B. The price of music downloads falls C. The price of CDs fallsA C T I V E L E A R N I N G 1 Demand Curve*Draw a demand curve for music downloads. What happens to it in each of the following scenarios? Why?*Copyright © 2011 Nelson Education LimitedA C T I V E L E A R N I N G 1 A. Price of iPods fallsA C T I V E L E A R N I N G 1 A. Price of iPods fallsMusic downloads and iPods are complements. A fall in price of iPods shifts the demand curve for music downloads to the right.*Copyright © 2011 Nelson Education LimitedA C T I V E L E A R N I N G 1 B. Price of music downloads fallsA C T I V E L E A R N I N G 1 B. Price of music downloads fallsThe D curve does not shift. Move down along curve to a point with lower P, higher Q. Price of music down-loadsQuantity of music downloadsD1P1Q1*Copyright © 2011 Nelson Education LimitedA C T I V E L E A R N I N G 1 C. Price of CDs fallsA C T I V E L E A R N I N G 1 C. Price of CDs fallsCDs and music downloads are substitutes. A fall in price of CDs shifts demand for music downloads to the left. Price of music down-loadsQuantity of music downloads*Copyright © 2011 Nelson Education LimitedSupplySupplyThe quantity supplied of any good is the amount that sellers are willing and able to sell. Law of supply: the claim that the quantity supplied of a good rises when the price of the good rises, other things equal 0*Copyright © 2011 Nelson Education LimitedThe Supply ScheduleThe Supply ScheduleSupply schedule: A table that shows the relationship between the price of a good and the quantity supplied. Example: Starbucks’ supply of lattes.Notice that Starbucks’ supply schedule obeys the Law of Supply. 0*Copyright © 2011 Nelson Education LimitedStarbucks’ Supply Schedule & CurveStarbucks’ Supply Schedule & CurvePQ0*Copyright © 2011 Nelson Education LimitedMarket Supply versus Individual SupplyMarket Supply versus Individual SupplyThe quantity supplied in the market is the sum of the quantities supplied by all sellers at each price. Suppose Starbucks and Jitters are the only two sellers in this market. (Qs = quantity supplied)Market Qs 0*Copyright © 2011 Nelson Education LimitednullThe Market Supply Curve0*Copyright © 2011 Nelson Education LimitedSupply Curve ShiftersSupply Curve ShiftersThe supply curve shows how price affects quantity supplied, other things being equal. These “other things” are non-price determinants of supply. Changes in them shift the S curve… 0*Copyright © 2011 Nelson Education LimitedSupply Curve Shifters: Input PricesSupply Curve Shifters: Input PricesExamples of input prices: wages, prices of raw materials. A fall in input prices makes production more profitable at each output price, so firms supply a larger quantity at each price, and the S curve shifts to the right. 0*Copyright © 2011 Nelson Education LimitednullSuppose the price of milk falls. At each price, the quantity of Lattes supplied will increase (by 5 in this example).Supply Curve Shifters: Input Prices0*Copyright © 2011 Nelson Education LimitedSupply Curve Shifters: TechnologySupply Curve Shifters: TechnologyTechnology determines how much inputs are required to produce a unit of output. A cost-saving technological improvement has the same effect as a fall in input prices, shifts S curve to the right. 0*Copyright © 2011 Nelson Education LimitedSupply Curve Shifters: # of Sellers Supply Curve Shifters: # of Sellers An increase in the number of sellers increases the quantity supplied at each price, shifts S curve to the right. 0*Copyright © 2011 Nelson Education LimitedSupply Curve Shifters: Expectations Supply Curve Shifters: Expectations Example: Events in the Middle East lead to expectations of higher oil prices. In response, owners of Texas oilfields reduce supply now, save some inventory to sell later at the higher price. S curve shifts left. In general, sellers may adjust supply* when their expectations of future prices change. (*If good not perishable)0*Copyright © 2011 Nelson Education LimitedSummary: Variables that Influence SellersSummary: Variables that Influence SellersVariable A change in this variable… Price …causes a movement along the S curve Input Prices …shifts the S curve Technology …shifts the S curve # of Sellers …shifts the S curve Expectations …shifts the S curve0*Copyright © 2011 Nelson Education LimitedA C T I V E L E A R N I N G 2 Supply CurveA C T I V E L E A R N I N G 2 Supply CurveDraw a supply curve for tax return preparation software. What happens to it in each of the following scenarios? A. Retailers cut the price of the software. B. A technological advance allows the software to be produced at lower cost. C. Professional tax return preparers raise the price of the services they provide. *Copyright © 2011 Nelson Education LimitedA C T I V E L E A R N I N G 2 A. Fall in price of tax return softwareA C T I V E L E A R N I N G 2 A. Fall in price of tax return softwareS curve does not shift. Move down along the curve to a lower P and lower Q.*Copyright © 2011 Nelson Education LimitedA C T I V E L E A R N I N G 2 B. Fall in cost of producing the softwareA C T I V E L E A R N I N G 2 B. Fall in cost of producing the softwareS curve shifts to the right: at each price, Q increases.Price of tax return softwareQuantity of tax return softwareS1P1Q1*Copyright © 2011 Nelson Education LimitedA C T I V E L E A R N I N G 3 C. Professional preparers raise their priceA C T I V E L E A R N I N G 3 C. Professional preparers raise their priceThis shifts the demand curve for tax preparation software, not the supply curve. *Copyright © 2011 Nelson Education LimitedSupply and Demand TogetherSupply and Demand TogetherEquilibrium: P has reached the level where quantity supplied equals quantity demanded 0*Copyright © 2011 Nelson Education LimitedEquilibrium price:Equilibrium price:the price that equates quantity supplied with quantity demanded0*Copyright © 2011 Nelson Education LimitedEquilibrium quantity:Equilibrium quantity:the quantity supplied and quantity demanded at the equilibrium price0*Copyright © 2011 Nelson Education LimitedSurplus (a.k.a. excess supply):Surplus (a.k.a. excess supply):when quantity supplied is greater than quantity demandedSurplusExample: If P = $5, then QD = 9 lattesand QS = 25 lattesresulting in a surplus of 16 lattes0*Copyright © 2011 Nelson Education LimitedSurplus (a.k.a. excess supply):Surplus (a.k.a. excess supply):when quantity supplied is greater than quantity demandedFacing a surplus, sellers try to increase sales by cutting price.This causes QD to rise…which reduces the surplus. and QS to fall… 0*Copyright © 2011 Nelson Education LimitedSurplus (a.k.a. excess supply):Surplus (a.k.a. excess supply):when quantity supplied is greater than quantity demandedFacing a surplus, sellers try to increase sales by cutting price.This causes QD to rise and QS to fall. SurplusPrices continue to fall until market reaches equilibrium. 0*Copyright © 2011 Nelson Education LimitedShortage (a.k.a. excess demand):Shortage (a.k.a. excess demand):when quantity demanded is greater than quantity suppliedExample: If P = $1, then QD = 21 lattesand QS = 5 lattesresulting in a shortage of 16 lattesShortage0*Copyright © 2011 Nelson Education LimitedShortage (a.k.a. excess demand):Shortage (a.k.a. excess demand):when quantity demanded is greater than quantity suppliedFacing a shortage, sellers raise the price,causing QD to fall…which reduces the shortage. and QS to rise,0*Copyright © 2011 Nelson Education LimitedShortage (a.k.a. excess demand):Shortage (a.k.a. excess demand):when quantity demanded is greater than quantity suppliedFacing a shortage, sellers raise the price,causing QD to falland QS to rise.ShortagePrices continue to rise until market reaches equilibrium. 0*Copyright © 2011 Nelson Education LimitedThree Steps to Analyzing Changes in Eq’mThree Steps to Analyzing Changes in Eq’mTo determine the effects of any event, 1. Decide whether event shifts S curve, D curve, or both. 2. Decide in which direction curve shifts. 3. Use supply-demand diagram to see how the shift changes eq’m P and Q. *Copyright © 2011 Nelson Education LimitedEXAMPLE: The Market for Hybrid Cars EXAMPLE: The Market for Hybrid Cars *Copyright © 2011 Nelson Education LimitedEXAMPLE 1: A Shift in Demand STEP 1: D curve shifts because price of gas affects demand for hybrids. S curve does not shift, because price of gas does not affect cost of producing hybrids. STEP 2: D shifts right because high gas price makes hybrids more attractive relative to other cars.EXAMPLE 1: A Shift in Demand EVENT TO BE ANALYZED: Increase in price of gas.STEP 3: The shift causes an increase in price and quantity of hybrid cars.*Copyright © 2011 Nelson Education LimitedEXAMPLE 1: A Shift in Demand EXAMPLE 1: A Shift in Demand P2Q2Notice: When P rises, producers supply a larger quantity of hybrids, even though the S curve has not shifted. Always be careful to distinguish b/w a shift in a curve and a movement along the curve. *Copyright © 2011 Nelson Education LimitedTerms for Shift vs. Movement Along CurveTerms for Shift vs. Movement Along CurveChange in supply: a shift in the S curve occurs when a non-price determinant of supply changes (like technology or costs) Change in the quantity supplied: a movement along a fixed S curve occurs when P changes Change in demand: a shift in the D curve occurs when a non-price determinant of demand changes (like income or # of buyers) Change in the quantity demanded: a movement along a fixed D curve occurs when P changes *Copyright © 2011 Nelson Education LimitedEXAMPLE 2: A Shift in Supply STEP 1: S curve shifts because event affects cost of production. D curve does not shift, because production technology is not one of the factors that affect demand.STEP 2: S shifts right because event reduces cost, makes production more profitable at any given price. EXAMPLE 2: A Shift in Supply EVENT: New technology reduces cost of producing hybrid cars.STEP 3: The shift causes price to fall and quantity to rise.*Copyright © 2011 Nelson Education LimitedEXAMPLE 3: A Shift in Both Supply and DemandEXAMPLE 3: A Shift in Both Supply and DemandEVENTS: price of gas rises AND new technology reduces production costsSTEP 1: Both curves shift.STEP 2: Both shift to the right. STEP 3: Q rises, but effect on P is ambiguous: If demand increases more than supply, P rises.*Copyright © 2011 Nelson Education LimitedEXAMPLE 3: A Shift in Both Supply and DemandEXAMPLE 3: A Shift in Both Supply and DemandSTEP 3, cont.EVENTS: price of gas rises AND new technology reduces production costsBut if supply increases more than demand, P falls. *Copyright © 2011 Nelson Education LimitedA C T I V E L E A R N I N G 3 Shifts in supply and demandA C T I V E L E A R N I N G 3 Shifts in supply and demandUse the three-step method to analyze the effects of each event on the equilibrium price and quantity of music downloads. Event A: A fall in the price of CDs Event B: Sellers of music downloads negotiate a reduction in the royalties they must pay for each song they sell. Event C: Events A and B both occur. *Copyright © 2011 Nelson Education LimitedA C T I V E L E A R N I N G 3 A. Fall in price of CDsA C T I V E L E A R N I N G 3 A. Fall in price of CDs2. D shifts leftThe market for music downloads1. D curve shifts3. P and Q both fall.STEPS*Copyright © 2011 Nelson Education LimitedA C T I V E L E A R N I N G 3 B. Fall in cost of royaltiesA C T I V E L E A R N I N G 3 B. Fall in cost of royaltiesThe market for music downloads1. S curve shifts2. S shifts right3. P falls, Q rises.STEPS(Royalties are part of sellers’ costs)*Copyright © 2011 Nelson Education LimitedA C T I V E L E A R N I N G 3 C. Fall in price of CDs and fall in cost of royaltiesA C T I V E L E A R N I N G 3 C. Fall in price of CDs and fall in cost of royaltiesSTEPS 1. Both curves shift (see parts A & B). 2. D shifts left, S shifts right. 3. P unambiguously falls. Effect on Q is ambiguous: The fall in demand reduces Q, the increase in supply increases Q. *Copyright © 2011 Nelson Education LimitedReal world Supply and Demand: Interpreting Signs from MarketsReal world Supply and Demand: Interpreting Signs from MarketsCopyright © 2011 Nelson Education Limited*Observe price change and quantity change. P ↓ D ↓ or S ↑ P ↑ D ↑ or S ↓ Q ↓ D ↓ or S ↓ Q ↑ D ↑ or S ↑ e.g. Rising sales and pricese.g. Rising sales and pricesCopyright © 2011 Nelson Education Limited*2000 – 2007 rising house markets in Canada P ↑ D ↑ or S ↓ Q ↑ D ↑ or S ↑ Demand dominates : baby boomer at the age of buying houses, people`s expectation, economic growth, low borrowing costse.g. Falling sales and rising pricese.g. Falling sales and rising pricesCopyright © 2011 Nelson Education Limited*2007 – 2008 house markets in Canada P ↑ D ↑ or S ↓ Q ↓ D ↓ or S ↓ supply dominates : higher costs, constructors` expectation, e.g. Falling sales and pricese.g. Falling sales and pricesCopyright © 2011 Nelson Education Limited*2008 – 2009 house markets in Canada P ↓ D ↓ or S ↑ Q ↓ D ↓ or S ↓ Demand dominates : high price, increase job instability, relative lower rental costs, etc.e.g. Rising sales and falling pricese.g. Rising sales and falling pricesCopyright © 2011 Nelson Education Limited*2009 – spring and early summer 2009 house markets in Canada P ↓ D ↓ or S ↑ Q ↑ D ↑ or S ↑ supply dominates : tax cut, expectation of government stimulus plan, e.g. Rising sales and pricese.g. Rising sales and pricesCopyright © 2011 Nelson Education Limited*2009 summer – 2011 rising house markets in Canada P ↑ D ↑ or S ↓ Q ↑ D ↑ or S ↑ Demand dominates : people`s expectation (high inflation), low borrowing costsCONCLUSION: How Prices Allocate ResourcesCONCLUSION: How Prices Allocate ResourcesOne of the Ten Principles from Chapter 1: