Managerial Economics in a

Global Economy
Chapter 1: Appendix
The Basics of Demand,
Supply, and Equilibrium

PowerPoint Slides by Robert F. Brooker

Harcourt, Inc.

Law of Demand
A decrease in the price of a good, all
other things held constant, will cause an
increase in the quantity demanded of
the good.
An increase in the price of a good, all
other things held constant, will cause a
decrease in the quantity demanded of
the good.
PowerPoint Slides by Robert F. Brooker

Harcourt, Inc.

Change in Quantity
Demanded
Price

An increase in price
causes a decrease in
quantity demanded.

P1
P0

Q1

Q0

PowerPoint Slides by Robert F. Brooker

Quantity
Harcourt, Inc.

Change in Quantity
Demanded
Price

A decrease in price
causes an increase in
quantity demanded.

P0
P1
Q0

Q1

PowerPoint Slides by Robert F. Brooker

Quantity
Harcourt, Inc.

Changes in Demand
Change in Buyers Tastes
Change in Buyers Incomes
Superior and Normal Goods
Inferior Goods

Change in the Number of Buyers

Change in the Price of Related Goods
Substitute Goods
Complementary Goods
PowerPoint Slides by Robert F. Brooker

Harcourt, Inc.

Change in Demand
An increase in demand
refers to a rightward shift
in the market demand
curve.

Price

P0

Q0

Q1

PowerPoint Slides by Robert F. Brooker

Quantity
Harcourt, Inc.

Change in Demand
A decrease in demand
refers to a leftward shift
in the market demand
curve.

Price

P0

Q1

Q0

PowerPoint Slides by Robert F. Brooker

Quantity
Harcourt, Inc.

Law of Supply
A decrease in the price of a good, all
other things held constant, will cause a
decrease in the quantity supplied of the
good.
An increase in the price of a good, all
other things held constant, will cause an
increase in the quantity supplied of the
good.
PowerPoint Slides by Robert F. Brooker

Harcourt, Inc.

Change in Quantity Supplied

A decrease in price
causes a decrease in
quantity supplied.

Price

P0
P1

Q1

Q0

PowerPoint Slides by Robert F. Brooker

Quantity
Harcourt, Inc.

Change in Quantity Supplied

An increase in price
causes an increase in
quantity supplied.

Price

P1
P0

Q0

Q1

PowerPoint Slides by Robert F. Brooker

Quantity
Harcourt, Inc.

Changes in Supply
Change in Production Technology
Change in Input Prices
Change in the Number of Sellers

PowerPoint Slides by Robert F. Brooker

Harcourt, Inc.

Change in Supply
An increase in supply
refers to a rightward shift
in the market supply curve.

Price

P0

Q0

Q1

PowerPoint Slides by Robert F. Brooker

Quantity
Harcourt, Inc.

Change in Supply
A decrease in supply refers
to a leftward shift in the
market supply curve.

Price

P0

Q1

Q0

PowerPoint Slides by Robert F. Brooker

Quantity
Harcourt, Inc.

Market Equilibrium
Market equilibrium is determined at the
intersection of the market demand
curve and the market supply curve.
The equilibrium price causes quantity
demanded to be equal to quantity
supplied.

PowerPoint Slides by Robert F. Brooker

Harcourt, Inc.

Market Equilibrium
Price
D

Q
PowerPoint Slides by Robert F. Brooker

Quantity
Harcourt, Inc.

Market Equilibrium
Price
D0

D1

S0
An increase in demand
will cause the market
equilibrium price and
quantity to increase.

P1
P0

Q0 Q1
PowerPoint Slides by Robert F. Brooker

Quantity
Harcourt, Inc.

Market Equilibrium
Price
D1

D0

S0
A decrease in demand
will cause the market
equilibrium price and
quantity to decrease.

P0
P1

Q1 Q0
PowerPoint Slides by Robert F. Brooker

Quantity
Harcourt, Inc.

Market Equilibrium
Price
D0

S0

P0
P1
Q0 Q1
PowerPoint Slides by Robert F. Brooker

S1

An increase
in supply
will cause
the market
equilibrium
price to
decrease and
quantity to
increase.

Quantity
Harcourt, Inc.

Market Equilibrium
Price
D0

S1

P1
P0
Q1 Q0
PowerPoint Slides by Robert F. Brooker

S0

A decrease in
supply will
cause the
market
equilibrium
price to
increase and
quantity to
decrease.

Quantity
Harcourt, Inc.