Demand & Supply

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Demand & Supply by Mind Map: Demand & Supply

1. Demand factors

2. Availability of related goods

3. Expectation of future price changes

4. Substitute goods are in competitive demand (Eab>0)

4.1. Changes in population and its structure

5. Complementary goods are in joint demand (Eab<0)

6. Changes in levels and distribution of income

7. Demand schedule is a table representing points on a demand curve

8. is the willingness, desire and ability to buy a good

9. Opportunity cost is what could've been bought in place of that good itself

10. Shifts are changes in demand, movements are changes in price resulting from quantity demanded

11. Laws

11.1. Law of demand: Price is inversely proportional to quantity demanded

11.2. Law of diminishing marginal utility: increase in satisfaction decreases with each additional unit consumed

12. Demand

12.1. Changes in taste/preferences

13. Supply

13.1. Supply schedule is a table representative of the points of a SS curve

13.2. Is the desire to produce a certain good backed by willingness and ability to do so

13.3. A shift in the supply curve is a change in supply, but a movement along the curve is a change in quantity supplied resulting from a change in price of the good itself

13.4. Supply factors

13.5. Marginal cost of production

13.6. Changes in production of related goods

13.7. Natural disasters, unpredictable events

13.8. Speculation

14. Laws

14.1. Law of supply: Price is directly proportional to quantity supplied

14.2. Law of diminishing marginal returns: as output increases, marginal costs increases, as more workers means lees capital to work with, explaining the upward sloping SS curve

15. Equilibrium price is the intersection of demand and supply curves

15.1. where quantity supplied = quantity demanded

15.2. a point where demand and supply settles, and have a tendency to remain at that point, ceteris paribus

15.3. where there is allocative efficiency and both producers and consumers are happy, welfare is maximised

16. Any shifts away from equilibrium will result in DD and SS adjusting until a new equilibrium is reached

16.1. A shift in SS to the right will cause a surplus and put a downward pressure on price, ceteris paribus

16.2. A shift in DD to the right will cause a shortage and put upward pressure on prices, ceteris paribus

16.3. When there is shifting of both DD and SS in the same direction, the magnitude of the shift would determine the direction of pressure on prices

17. H2: Consumer and producer surplus

17.1. Consumer surplus: The difference between what consumers are willing and able to pay for a good and what they actually pay for it

17.2. Area below the demand curve to the price line

17.3. Producer surplus: the difference between the cost price of the good and the price they receive

17.4. Area below the price line and above the supply curve