supply vs. demand

Examples of supply vs. demand in the following topics:

• Explaining Fluctuations in Output

  • In the short run, output fluctuates with shifts in either aggregate supply or aggregate demand; in the long run, only aggregate supply affects output.
  • The level of output is determined by both the aggregate supply and aggregate demand within an economy.
  • Aggregate supply and aggregate demand are graphed together to determine equilibrium.
  • The equilibrium is the point where supply and demand meet to determine the output of a good or service.
  • Supply and demand may fluctuate for a number of reasons, and this in turn may affect the level of output.

• Macroeconomic Equilibrium

  • In economics, the macroeconomic equilibrium is a state where aggregate supply equals aggregate demand.
  • In economics, equilibrium is a state where economic forces (supply and demand) are balanced.
  • There are four basic laws of supply and demand.
  • The laws impact both supply and demand in the long-run.
  • It is represented on the AS-AD model where the demand and supply curves intersect.

• Supply Schedules and Supply Curves

  • A supply schedule is a tabular depiction of the relationship between price and quantity supplied, represented graphically as a supply curve.
  • The supply curves of individual suppliers can be summed to determine aggregate supply.
  • One can use the supply schedule to do this: for a given price, find the corresponding quantity supplied for each individual supply schedule and then sum these quantities to provide a group or aggregate supply.
  • The other component is demand.
  • When the supply and demand curves are graphed together they will intersect at a point that represents the market equilibrium - the point where supply equals demand and the market clears.

• Applications of Elasticities

  • For example, to determine how a change in the supply or demand of a product is impacted by a change in the price, the following equation is used: Elasticity = % change in supply or demand / % change in price.
  • The price is a variable that can directly impact the supply and demand of a product.
  • For inelastic demand, the overall supply and demand of a product is not substantially impacted by an increase in price.
  • An elastic demand curve shows that an increase in the supply or demand of a product is significantly impacted by a change in the price .
  • For elastic demand, when there is an outward shift in supply, prices fall which causes a large increase in quantity demanded.

• The Influence of Supply and Demand on Price

  • The amount of a good in the market is the supply and the amount people want to buy is the demand.
  • Supply and demand is an economic model of price determination in a market.
  • Since determinants of supply and demand other than the price of the good in question are not explicitly represented in the supply-demand diagram, changes in the values of these variables are represented by moving the supply and demand curves (often described as "shifts" in the curves).
  • The point where the supply line and the demand line meet is called the equilibrium point.
  • Apply the basic laws of supply and demand to different economic  scenarios

• Impact of Changing Price on Producer Surplus

  • Producer surplus is affected by changes in price, the demand and supply curve, and the price elasticity of supply.
  • Changes in the price level, the demand and supply curves, and price elasticity all influence the total amount of producer surplus, other things held constant.
  • If demand decreases, and the demand curve shifts to the left, producer surplus decreases.
  • Conversely, if demand increases, and the demand curve shifts to the right, producer surplus increases.
  • Examine producer surplus in terms of changes in demand, supply, price, and price elasticity

• Reasons for and Consequences of Shift in Aggregate Demand

  • In economics, aggregate demand is the total demand for final goods and services at a given time and price level.
  • The aggregate supply-aggregate demand model uses the theory of supply and demand in order to find a macroeconomic equilibrium.
  • The shape of the aggregate supply curve helps to determine the extent to which increases in aggregate demand lead to increases in real output or increases in prices.
  • Likewise, if the monetary supply decreases, the demand curve will shift to the left.
  • The Aggregate Supply-Aggregate Demand Model shows how equilibrium is determined by supply and demand.

• Promotional Strategies

  • Wal-Mart is an example of a company that uses the push vs. pull strategy.
  • In the first case information is just "pushed" toward the buyer, while in the second case it is possible for the buyer to demand the needed information according to their requirements.
  • The business terms push and pull originated in logistic and supply chain management, but are also widely used in marketing.
  • Wal-Mart is an example of a company that uses the push vs. pull strategy.
  • In markets the consumers usually "pull" the goods or information they demand for their needs, while the offerers or suppliers "pushes" them toward the consumers.

• Short Run Firm Production Decision

  • When a firm is transitioning from the short run to the long run it will consider the current and future equilibrium for supply and demand.
  • In a perfectly competitive market, the short run supply curve is the marginal cost (MC) curve at and above the shutdown point.
  • The short run supply curve is used to graph a firm's short run economic state .
  • This graph shows a short run supply curve in a perfect competitive market.
  • The short run supply curve is the marginal cost curve at and above the shutdown point.

• Measuring the Price Elasticity of Supply

  • The price elasticity of supply is the measure of the responsiveness of the quantity supplied of a particular good to a change in price.
  • The price elasticity of supply is directly related to consumer demand.
  • PES = 0: Supply is perfectly inelastic.
  • The price elasticity of supply is calculated and can be graphed on a demand curve to illustrate the relationship between the supply and price of the good .
  • A demand curve is used to graph the impact that a change in price has on the supply and demand of a good.