Economics Project Demand Supply Change in demand Change
- Slides: 33
Economics Project Demand & Supply -Change in demand -Change in supply -Effects of changes in demand supply
Economics Project Demand & Supply -Change in demand -Change in supply -Effects of changes in demand supply
Change in demand is caused by a change in factors, such as income, taste, weather conditions, future price, Derived demand, Size of population, etc. . other than a good’s own price. It is represented by a shift of the entire demand curve.
When demand is increased, demand curve will shift to the right, as the orange arrow. When demand is decreased, demand curve will shift to the left as the purple arrow.
But remember change in demand is different from change in Quantity demanded. In order to make you more understand change in demand. We have some example for further explain.
This news is about a restaurant which using theme of prison. In Beijing, there is a restaurant. In order to attract more people to patronize, the Boss designs his restaurant like a prison. Since there are no restaurant like this restaurant so special, so many people come to patronize and visit.
In above news, the restaurant’s boss make use of theme of prison as its selling point to attract more people to patronize his restaurant. This is an example of change in demand. Because of people curiosity, they go to visit this restaurant. In this case, the demand for people to visit this restaurant is affected by taste factor. Demand increased and the demand curve shift to the right from D to D 1.
Except the example we mention above, we also have another factors that can affect demand.
When the weather is cold, no people will like to buy airconditioner, as a result, the demand for air-conditioner will decrease, the demand curve shift to the left from D 1 to D.
Economics Project Demand & Supply -Change in demand -Change in supply -Effects of changes in demand supply
Economics Project Demand & Supply -Change in demand -Change in supply -Effects of changes in demand supply
After demand, we should also talk about supply side! It is caused by a change in factors. Such as cost, seller’s objectives, etc) other than a good’s own price. It is represent by a shift of the entire supply curve.
When supply is increased, supply curve will shift to the right, as the orange arrow. When supply is decreased, supply curve will shift to the left as the purple arrow.
In the past, not many Hong Kong people were educated. Many people were fishermen, farmers and many people worked on the street to help other people to “wash” their shoes. But now on, there are only few people work on this occupation. In the above case, since there are few people work in “wash shoes” sector. As a result, the market supply will decrease. It is due to the factor of “numbers of producers”. .
As the number of producers decreases due to the change of century. The supply of “wash shoes” becomes smaller, the supply curve shifts to left from S 2 to S.
Economics Project Demand & Supply -Change in demand -Change in supply -Effects of changes in demand supply
Economics Project Demand & Supply -Change in demand -Change in supply -Effects of changes in demand supply
Because of the slaughter of great amount of chickens, the market supply decreased. The supply curve shifted from S 2 to S. However, it was not the end of the story.
On the other hand , there were many people felt sick after taking the chickens. So their demand for the chicken decreased because they afraid to eat them. As a result, in this case, there was a decrease in both demand supply. The figure shown above showed how it affected the price and quantity transacted.
WAIT!! I still have an important thing to remind you! If there is an increase in both demand supply, the quantity transacted will increase. Vice versa. Just like the case mention before. However, although in the case before, after the changes, the price was unchanged, but price actually may increase , decrease or remain unchanged, it depends on whether the decrease in demand is larger or smaller than or equal to the decrease in supply.
This is the case of “Increase in DD > increase in SS”. DD curve shifts to the right by a greater extent than the SS curve. The market price increases to p 2. The quantity transacted also increases to q 2.
This is the case of “Increase in DD < increase in SS”. DD curve shifts to the right by a smaller extent than the SS curve. The market price decreases to p 2. The quantity transacted increases to q 2.
This is the graph of the case before. It is the case of “decrease in DD = decrease in SS”. DD curve shifts to the right by the same extent as the SS curve. The market price remains at p 1. The quantity transacted decreases to Q 2.
Economics Project Demand & Supply -The theory of demand -The theory of supply -Equilibrium market price -Change in demand -Change in supply -Effects of changes in demand supply
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