Business Fundamentals - Supply and Demand - BEC 10

1. BUSINESS
FUNDAMENTALS
SUPPLY and DEMAND

2. SUPPLY AND DEMAND
Supply
 represents willingness to sell
at certain price
 relationship between price
and the quantity supplied
(actually sell)
Demand
 represents willingness and
ability to buy at a certain price
 relationship between price and
quantity demanded (actually
buy)

3. SUPPLY
Is the quantity of goods or services that
businesses are willing and able to provide
within a range of prices that people would be
willing to pay
Law of Supply: the relationship of increasing
the quantity supplied as price increases.

4. CONDITIONS THAT AFFECT SUPPLY:
 Change in the number of producers (more
businesses, more supply, decrease in price)
 Price of related goods: (cost of IPODs increase
the demand for MP3 players increases)
 Change in technology: (MP3 technology makes
the availability demand for CD Walkmans
decrease and the supply of CD walkmans
increase)
 Change in the cost of production: (the lower the
cost of production the more that is produced,
consider resources)

5. DEMAND
Is the quantity of a good or service that
consumers are willing and able to buy at a
particular price.
Law of Demand: Consumers will increase the
quantity demanded of a good or service as
prices decease and the reverse as prices
increase

6. CONDITIONS THAT AFFECT DEMAND:
A change in consumer tastes, awareness
and interest in good or service
Change in consumer income
A change in consumer expectations of future
market conditions
A change in population

7. PRICE
is determined by supply and demand
and the cost of production.

8. SUPPLY AND DEMAND CURVE
Supply Curve
 Law of Supply
 the higher the price of the
product, the more the
producer will supply
Demand Curve
 Law of Demand
 the higher the price
of the product, the
less the consumer
will demand
 Positive relationship
with price, the curve is
upward sloping
 Negative relationship
with price, the curve
is downward
sloping

9. SUPPLY AND DEMAND CURVE
Equilibrium is reached when both curves
intersect.
 At this point, the price is just high enough so that the quantity
people want to buy is equal to the quantity business want to
sell
 the quantity demanded = the quantity supplied