Chapter 4 (Supply and Demand) serves as the foundation for the rest of this course. If you can fully understand the concepts in this chapter you will have an easier time with the material in the future. Supply, Demand, and market analysis are what economics is all about! While these are very intuitive concepts and are not difficult they are new to most of you and will require you to think about their formulation. I do not like to use the word memorize especially with economics but there are two case scenarios that affect the supply and demand curves. It is critical you understand these two scenarios between how price affects the curves and how other factors shift them. I highly recommend that you take advantage of ALL of the supplemental assignments to help with your understanding of these concepts. It is imperative you understand the difference between a 1) change in quantity demanded (a movement along a fixed curve, see figure 1 caused only by a change in price) and, 2) a change in demand (a movement of the entire curve, see figures 3 & 4 caused by a variety of factors but never price). The same rules apply to the supply curve as well.
Assignment: From any reputable source, find one article discussing any element of supply, demand or a price alteration. I want you to connect these very important concepts to the real-world. Trust me; you will have no problem finding an article discussing these issues. Once finding the article, jot down a brief of what is occurring in this market, DO NOT GIVE AN ANSWER, You do not need have articles that “explicitly” state the exact price and quantity of crude oil being imported each month, these articles and topics can be completely generic! I want you to practice your critical thinking and your ability to tie these very important concepts to the real world. All of these items can refer to generic concepts we discuss in Chapter 4. For instance, suppose you found an article that the textbook you are using is going to be customized for the sole use of Douglas University students. What happens to the demand for the customized text if enrollment increases 25% for Douglas Online? Very simple, you can even graph this to ensure your thinking is correct. A graph is not necessary in the discussion board but feel free to incorporate one if you are so inclined. In economics, a picture is worth a thousand words. It should make sense that when demand shifts to the right (see Table 1) because there are more students there will be upward pressure on price in order to entice the supplier to supply more, is that the case with your text? Yep! [Graph this for yourself, noting a generic supply and demand curve, see key graph 8, when demand increases (it shifts to the right, due to a rise in the number of buyers, this puts upward pressure on price so suppliers will be enticed to supply more texts to meet the rise in demand) Example 2: I was visiting some friends at Lake Martin, AL this past summer and it was somewhat secluded where we were staying. There are restaurants in the vicinity but not too many “grocery stores” of sorts. We went to a fresh local market to get some items to cook for dinner. As an economist and a person who loves to cook, I was in heaven with this little fresh market. However, what did I note? Well, I knew they were catering to a particular niche of customers in addition, pretty much had monopoly power on the ‘grocery store element’ (you typically can’t get steaks at a convenience store). As I suspected the prices were considerably higher but consumers were still shopping. A concept termed: elasticity, which you will analyze in Chapter 5 but people are willing and able to pay for a product versus going without it. These prices would not be as wellreceived or likely charged if there were 2-3 competitors within a few miles range. However, the firms know this and can make a profit by charging higher prices, because they are getting less foot traffic than a typical large grocery store in a more populated area. Both market participants are happy. And if the consumer is not-he/she doesn’t make a purchase. Markets are efficient and impersonal, don’t forget that. As well, firms are not in the benevolence business. They operate to make a profit just like consumers operate to save money and have their needs & wants met with a purchase. You can give personal examples such as this as long as they are connected to supply & demand.
