K.J. Somaiya Comprehensive K.J. Somaiya Comprehensive College Of Education ,Training College Of Education ,Training And Research (B.EdAnd Research (B.Ed))

NAME - SONAL KHANNA

ROLL NO – 31

ECONOMICS

CAUSES FOR CHANGES IN DEMAND AND SUPPLY

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More incomeMore incomeresults inresults in

more demandmore demandfor new cars;for new cars;less demandless demandfor used cars.for used cars.

New CarsNew Cars Used CarsUsed Cars

Less incomeLess incomeresults inresults in

more demandmore demandfor used cars;for used cars;less demandless demandfor new cars.for new cars.

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More demand More demand for both newfor both newand used carsand used cars

New CarsNew Cars

Used CarsUsed Cars

This is what we told 1 billion 1 billion ChineseChinese, as new potential new potential consumersconsumers, when we opened

trade relationstrade relations with them in the 70s.

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If Mr.Rakesh responds to iRateiRate customers who

bought the iPhoneiPhone at Rs39900 and says, “iSorryiSorry,we will raise the price back to Rs39900 in 3 weeks.”

iPhoneiPhoneRs39900Rs39900

Buy it now to save money.Buy it now to save money.

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If there is expected to be a major shortage of toilet tissuemajor shortage of toilet tissue,then consumers will stock up now or risk not getting any.

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Let’s say that we are coming out of recessioncoming out of recession & consumersfeel secure about their jobs. [Positive future incomePositive future income]

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Let’s say that we are going into a recessiongoing into a recession and consumersdon’t feel secure about their jobs. [NegativeNegative future income future income]

ComplementComplement[[InverseInverse]]

SubstituteSubstitute[[DirectDirect]]

MilkMilk CerealCereal Pop TartsPop Tarts

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1.1.ResourceResource CostCost [wages & raw materials[wages & raw materials]] [Inverse][Inverse]

WagesWages Raw MaterialsRaw Materials

SSIf resource cost

decreases supply

Increases[making more $]

If resource cost

increases supply

Decreases[making less $]

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BroccoliBroccoli““Substitutes in production”Substitutes in production”I only have I only have

200 acres200 acres

SCornCorn SS11

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QS1QS1

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S CornCornProducers want to produce more of the good where price is increasing,Producers want to produce more of the good where price is increasing,

or at least, where the price is not going down.or at least, where the price is not going down.

BroccoliBroccoli

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QS2QS2

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SS

Because cows produce moremilk, farmersdon’t have to have as manycows.[saves $]

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We love these cow waterbeds We love these cow waterbeds because webecause we get get better better blood flowblood flow and can and can produce 30% more milkproduce 30% more milk..

Supply curvemoves “udderly”“udderly”to the right.

Less skin abrasionsso happier cowsproduce more milk.

Mooooove Mooooove over and give me thatover and give me that waterbed. waterbed.

Waterbedsforcows.com

NFLNFL

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$50$50

SupplySupply of of FB games increased when the XFL was FB games increased when the XFL was formed. formed.

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QSQS QSQS

XFL XFL in 2001in 2001

Because of the Because of the XFL’s XFL’s cheerleaderscheerleadersmany called thismany called thisleague, not theleague, not the

XFL, but theXFL, but theSupply of FB games each week

XXXFLXXXFL XFL [Extreme Football League]

8 new teams8 new teams

If oil producers expectexpect future oilfuture oil prices toprices to declinedecline, they will (increase/decrease) current production.

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Oil PricesOil Prices

expectedexpected to decreaseto decrease

[“INVERSE”][“INVERSE”]

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If oil producers expect future oil prices to expect future oil prices to increaseincrease, they will (increase/decrease) current production.

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Oil PricesOil Prices

expected expected to increaseto increase

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Free money from the government (subsidiessubsidies) induces suppliers to supply more.

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If subsidies are taken away, then suppliers are losingmoney and will decrease supply.

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If business have their taxes decreasedtaxes decreased,it moves the supply curve to the right.

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If business have their taxes increasedtaxes increased, it moves the supply curve to the left.

I’m losingI’m losingprofits.”profits.”

Let’s check your memory• What are the market determents ?

DEMAND AND SUPPLY

• Which are the reasons for CHANGE in demand?

TIMER

Taste Income Market size Expectation of consumers

Related goods (prices)

• How does INCOME affect demand?

Inc income more purchases of new goods

•What are the determinants of supply?RATNEST

Resource cost, Alternative price change , Technological improvements,No:of suppliers, Producer expectation of prices,Subsidires,Taxes

•How do producers react to future supply changes?

With respect to changes in demand the producer will increase or decrease production

Let’s check your memory

Thank- YouThe End