Presentation on theme: "Understanding Supply Economics. Economic Market Market: Any place where people come together to buy and sell goods or services An economic market has."— Presentation transcript:
1 Understanding Supply Economics
2 Economic Market Market: Any place where people come together to buy and sell goods or services An economic market has two sides: The buying side is
referred to as demand The selling side is referred to as supply P = Price, Q = quantity,
3 What is Supply? The willingness and ability of sellers to produce and offer to sell different quantities of a good at different prices during a specific time period. Willingness refers to a sellers desire to sell Ability refers to a sellers capability to sell
4 What is Supply? Ex: Joe is willing to make and sells shoes. However, Joe does not know how (have the ability) to make shoes. Outcome: Joe cannot supply shoes
5 What is Supply? Push up scenario How many push ups are you WILLING and ABLE to do for $1 $2 $3
6 What is the Law of Supply? Law of Supply: A
law stating that as the price of a good increases, the quantity supplied of the good increases, and as the price of a good decreases, the quantity supplied of the good decreases (direct relationship). If P up then Q s up If P down then Q s down
7 Quantity supplied The
number of units of a good produced and offered for sale at a specific price. Ex: A seller offers five hot dogs at $2. Five is the quantity supplied at that price.
8 Supply Schedule A numerical chart illustrating the law of supply Notice
the representation of the law of supply PriceQuantity Supplied 112 228 342 452 560
9 Supply Curve A graph that shows the amount of a good sellers are willing and able to sell at various prices Price is always on the vertical
axis. Quantity supplied is always on the horizontal axis.
10 The Supply Curve Shifts When supply increases, the curve shifts right. When supply decreases, the curve shifts left.
11 Vertical Supply Curve This exists in a situation where there are a limited amount of a good or service Vertical supply curve indicates a change in price will have no effect on the quantity supplied. Ex: Theater tickets; stadium tickets, certain antiques 0 10 20 30 40 50 60 70 0 10 20 30
12 What Factors Cause Supply Curves to Shift? Weather: Ex: a hurricane wrecks sugarcane fields in the Caribbean. Therefore, the cost of sugar increases. Inputs (Resource Prices): Land, labor, and capital Government Taxes: Taxes on the per-unit costs (avg. cost of a good) increase or decrease Subsidies: A financial payment made by
the government Quotas: A legal limit on the number of units of a foreign produced good (import) that can enter the country
13 What Factors Cause Supply Curves to Shift? Number of Sellers: More or fewer sellers enter the market Expectations of Future Prices: Prices are expected to increase or decrease Technology: The ability to
produce more output with a fixed amount of resources
14 Change in Supply vs. Change in Quantity Supplied A change in supply refers to a shift in the supply curve. This can be brought on by 6 possible factors / shifters S1S1 S2S2
15 Change in Supply vs. Change in Quantity Supplied A change in quantity supplied refers to a movement along a given supply curve. This is brought on ONLY by a change in a good’s price S1S1 A B
16 Assignment Supply Headlines
A market is any location where vendors of specific commodities or services can meet buyers of those same goods or services. It establishes the possibility of a transaction taking place. To have a successful transaction, the purchasers must have something to offer in return for the product.
Markets for products and services and marketplaces for factors of production are the two basic categories of markets. Depending on their characteristics, markets can be classed as perfectly competitive, imperfectly competitive, or monopolistic.
Any measures taken by a firm to attract an audience to its goods or services through high-quality messaging are referred to as marketing. With the long-term goal of showing product value, developing brand loyalty, and eventually increasing sales, marketing strives to create standalone value for prospects and consumers through content.
The market economy is a system in which supply and demand determine how goods and services are produced. Natural resources, capital, and labor all contribute to supply. Consumers, businesses, and the government all make purchases.
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Definition of a Market
A market is a gathering area where people can come together to exchange products and services. Buyers and sellers are the most common parties engaged.
The market may be tangible, such as a retail establishment where people meet face to face, or virtual, such as an online market where buyers and sellers may not have direct physical contact. These businesses employ laborers and workers. Businesses and customers own land, buildings, materials, resources, and money.
Market-based businesses are frequently in competition with other businesses. Other businesses or competitors provide similar goods or services.
A market economy must have at least six traits in order to function.
Self-Interest Motive
The majority of businesses were founded with the goals of the persons who began them in mind. A market economy creates opportunity, allows people to work for themselves, and allows them to care for their families in the most efficient way possible.
Everyone sells their goods to the highest bidder while bargaining for the best deal on their purchases. Although the motivation is selfish, it ultimately benefits the economy.
It establishes an auction system in which products and services are priced according to their market value. In addition, the system generates a precise picture of demand and supply at any given time.
Markets and Prices System
A market economy relies on a well-functioning marketplace for the exchange of commodities and services. When all buyers and sellers have equal access to the same information about prices, supply, and demand, a market is said to be efficient. As a result, price variations are just a reflection of supply and demand rules.
Competition
Prices are kept low by competitive pressure. It also ensures that commodities and services are delivered more efficiently throughout society. The rule of demand dictates that when demand for a certain item rises, so do prices.
Competitors recognize that by making the same thing and increasing supply, they may increase profit. As a result, prices fall to the point where only the top competitors remain. This competitive pressure is felt by both employees and customers. Employees compete for the best-paying jobs, while purchasers compete for the greatest goods at the best price.
Private Ownership
The majority of commodities and services are owned by individuals. Owners can make money by selling or leasing their property, products, or services.
Ownership Freedom
In a competitive market, owners have the freedom to manufacture, sell, and buy commodities and services. They only have two elements over which they have some control.
First and foremost, a buyer must be willing to pay the price that the seller has established for their goods or services.
Second, the cost of producing and selling their goods, as well as the price at which they may sell them, define the quantity of capital they have.
Limited Government
One of the government's responsibilities is to keep the markets open, functional, stable, fair, and secure. The government, for example, establishes regulatory organizations to guarantee that items are safe to use and consume and that corporations are not exploiting consumers.
It also seeks to guarantee that everyone has access to the markets on an equal basis. Companies that control an excessive amount of market share, known as monopolies, are penalized by the government. Regulating organizations aim to guarantee that markets are not manipulated and that everyone has equal access to information.
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Types of Markets
There are many different types of marketplaces where buyers and sellers meet to conduct business, and they can be categorized based on their location, size, type of items sold, and duration, among other things. The size of any market is determined by the total number of buyers and sellers as well as the value of items transacted.
The following are the most prevalent market types:
Auction Markets
An auction market is a location where a specific sort of item can be sold or purchased. It has one seller and several buyers. The buyers place bids on purchase prices, and the item is eventually sold to the highest bidder.
Auction markets may feature real estate and cattle in addition to rare artwork and jewelry prices. Bidders can put anonymous bids and win auctions on eBay, which is a virtual auction market.
Financial Markets
A financial market is a place where you may buy and sell any security or financial instrument. Real assets such as currencies, bonds, and corporate shares are examples of securities. They may also include derivative products, such as mortgage-backed CDOs or options, that draw their value from other securities.
The basis of capital formation and liquidity provision is financial market trade. The New York Stock Currency (NYSE), foreign exchange market, and bond market are examples of physical or virtual markets.
Black Markets
The term "black market" refers to an unlawful market that operates outside of the government's regulating industries. Because such markets are basically illegal, any contract for the sale of goods is not merely null and invalid. They may also face criminal or financial consequences.
To avoid paying taxes, most black market sales are carried out through cash transactions, making them difficult to detect and tax. They could also be used to sell unlawfully obtained things like stolen artwork or illegally poached animals.
When some commodities and services are scarce in developing nations, black markets emerge. During the Prohibition Era in the United States, for example, alcohol bootleggers became commonplace.
The notion of automated price setting in accordance with demand and supply does not apply to black marketplaces. It allows vendors to offer unusual or rare items at exorbitant prices. Ticket scalping and the sneaker resale industry are two examples. Middlemen buy such items in bulk and resell them on the illicit market at inflated prices.
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The Four P's of Marketing
Below we’ve explicitly stated and discussed the 4 Ps of Marketing :
4Ps of Marketing
Promotion
Promotion marketing, according to the Association of National Advertisers (ANA), consists of methods that drive short-term purchases, influence trial and quantity of purchases, and are highly measurable in terms of volume, share, and profit.
Coupons, contests, rebates, premiums, customized packaging, cause-related marketing, and licensing are all examples.
Product
A product is described as a collection of characteristics (features, functions, benefits, and uses) that may be exchanged or used, typically in a combination of tangible and intangible forms.
A product can therefore be an idea, a physical object (goods), a service, or any combination of the three. It exists to facilitate exchange in the pursuit of individual and organizational goals. While the term "products and services" is sometimes used, the term "product" refers to both goods and services.
Place (or Distribution)
Distribution is the act of marketing and carrying things to customers. It's also used to define the breadth of a product's market coverage. Place or placement represents dispersion in the 4 Ps.
Price
It is a formal ratio that expresses how much money, products, or services are required to acquire a specific quantity of goods or services. It is the price a client must pay in order to obtain a thing.
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Advantages of Markets
Profits are rewarded for Innovation
Consumers will be better served by innovative new items than by existing goods and services. Other competitors will benefit from these cutting-edge technology, allowing them to become more profitable as well. This knowledge sharing exemplifies why Silicon Valley is America's competitive advantage.
Supply and demand are driven by consumers and businesses
Because a market economy permits supply and demand to interact freely, the most desirable commodities and services are produced. Consumers are eager to spend top dollar for the items they desire most. Businesses will only manufacture products that profit them.
Efficiency breeds Competition
Goods and services are manufactured as efficiently as feasible. Companies that are more productive will earn more than those that are less productive.
Businesses make Investments in one Another
The most successful companies invest in other successful enterprises. This offers them an advantage and leads to higher manufacturing quality.
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Disadvantages of Markets
Not everyone has the ability to achieve their full potential
Society's human resources may not be fully used. Children in low-income families, for example, frequently work low-wage jobs to help the family pool resources to survive. These children might be given greater possibilities for schooling and a career in an area they are interested in if a market economy was concerned with advancement rather than self-interest.
Self-interest often takes precedence over concern for the greater good
The values of the market economy's winners are reflected throughout society. Some people may be able to afford private jets thanks to the market economy, while others go without food or a place to call home. A pure market economy society must decide whether or not to care for the vulnerable.
Competition leaves out the disadvantaged
Competition is the most important mechanism in a market economy. As a result, there is no framework in place to help people who are already at a disadvantage. This includes seniors, children, and persons who are unable to work due to mental or physical disability.
Caretakers of the poor are frequently overlooked
Those who look after the poor are likewise at a disadvantage. Their energies and skills are focused on caring for others rather than competing. If they weren't caregivers, many of these people could contribute to the economy's overall comparative advantage.
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Innovation is a feature of any economy. The more inventive the production elements used, the more efficient they are used, resulting in better products that meet consumer demand. As a result, the most productive companies invest in new equipment, increasing output and potentially creating new demand for innovative products and services.
Regulatory and intermediate institutions are established to prevent market malpractices. They assist in the elimination of market information asymmetries and the establishment of market rules and guidelines.
They also collaborate with a country's judiciary to determine civil and criminal liability for malpractices. The Securities and Exchange Commission is the market regulator in the United States (SEC).