Bài giảng Macroeconomics - Chapter 2: Supply and demand - Nguyễn Thùy Dung

ECO107 
MICROECONOMICS
Lecturer: MSc. Nguyen Thuy Dung
Faculty of Accounting, Banking and Finance
www.hutech.edu.vn/quocte
HUTECH Institute of International Education Supply and Demand
Market and 
Competition
Demand
Equilibrium
TOPIC 2 
Supply
2.1
2.2
2.3
2.4
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What is a market?
2.1 MARKET AND COMPETITION
Market and Competition
A market is a group of
buyers and sellers of a
particular good or services
Research objectives
Market
Demand
(behaviors of buyers)
Supply
(behaviors of sellers)
Market Equilibrium
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MARKET AND COMPETITION
Market and Competition
▪ Competitive market: a market with many buyers
and sellers and each of them has a negligible
effect on market price.
▪ A perfectly competitive market must have 2
characteristics:
(1) All goods exactly the same
(2) Buyers & sellers so numerous that no one
can affect market price – each is a “price taker”
▪ In this chapter, we assume markets are perfectly
competitive.
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DEMAND
Demand
▪ The quantity demanded of any good is the
amount of the good that buyers are willing and
able to purchase.
▪ Law of demand: the claim that the quantity
demanded of a good falls when the price of the
good rises if other things being equal
Quantity
Price
DemandQ
P
D
Quantity demandedQD
2.2
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Demand schedule
Demand
Demand schedule:
A table that shows the relationship between the
price of a good and the quantity demanded
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Demand curve
Demand
Demand curve
A graph show
the relationship
between price
of a good and
the quantity
demanded
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Individual and Market demand
Demand
Individual demand
Market demand
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Demand curve
Demand
Assume there’re only Kate and Charlie in the market
demand of milk. Each month, Kate buys 6 cans of milk with
the price of $1 each; buy 4 cans with $1.5 each. Charlie
buys 4 cans of milk with the price of $1 each, buy 2 cans
with $1.5 each.
Which point will be on the market demand curve of milk?
A. Q = 2; P = 1,5
B. Q = 4; P = 2,5
C. Q = 10; P = 1
D. Q = 16; P = 2,5
Movement along 
curve
Cause by price
Shift in curve
Cause by other factors
Factors affect Demand
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Shift in Demand curve 
Demand
P0
Price
0
Q0 Q1
D0
D1
QuantityQ2
Decrease Increase
A change in demand 
can be represented by a 
shift in the position of 
the demand curve.
A change in demand results from a change in one or more
of determinants of demand, other than the price of the goods.
D2
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With normal goodsIncome
Demand law
Price of goods
With inferior goods
Shift in Demand curve 
Causes a movement
along the D curve
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Price of related goods
Shift in Demand curve 
❑Substitutes
2 goods, an increase in the price of one leads to an 
increase in the demand for the other
❑Complements
2 goods, an increase in the
price of one leads to an
decrease in the demand for
the other
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Shift in Demand curve 
❑ Tastes
– Change in tastes → changes the demand
❑ Expectations - about the future (income, prices)
– Affect current demand
❑ Number of buyers – increase
– Market demand will increases
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SUPPLY
Supply
▪ The quantity supplied of any good is the
amount of the good that sellers are willing and
able to sell
▪ Law of supply: the claim that the quantity
supplied of a good rises when the price of the
good rises if other things being equal
Quantity
Price
SupplyQ
P
S
Quantity suppliedQS
2.3
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Supply schedule
Supply
Supply schedule:
A table that shows
the relationship
between the price
of a good and the
quantity supplied
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Supply curve
Supply
A graph show the relationship between price of a
good and the quantity supplied
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Individual and Market supply
Supply
Individual supply
Market Supply
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Shift in Supply curve 
Supply
Price
0
S0 S1
Quantity
Increase
Decrease
S2
A change in supply results from a change in one or more
of determinants of supply, other than the price of the goods.
A change in supply 
can be represented 
by a shift in the 
position of the supply 
curve.
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Supply curve Shifter
Supply
Technology
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Supply curve Shifter
Supply
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Market equilibrium
Market equilibrium
At $2.00, the quantity demanded 
is equal to the quantity supplied!
Demand Schedule Supply Schedule
2.4
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Market equilibrium
Market equilibrium
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Market equilibrium
Market equilibrium
▪Equilibrium - a situation in which the market
price has reached the level at which quantity
supplied equals quantity demanded
▪Equilibrium price - the price that balances
quantity supplied and quantity demanded
▪Equilibrium quantity - the quantity supplied and
the quantity demanded at the equilibrium price
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Markets not in equilibrium
Market equilibrium
Surplus
A situation in which 
quantity supplied is 
greater than 
quantity demanded
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Markets not in equilibrium
Market equilibrium
Shortage
A situation in which 
quantity demanded 
is greater than 
quantity supplied
HUTECH Institute of International Education Market equilibrium
To determine the effects of any event, 
1. Decide whether event shifts S curve, 
D curve, or both. 
2. Decide in which direction curve shifts. 
3. Use supply-demand diagram to see 
how the shift changes eq’m P and Q. 
3 steps to analyze change in equilibrium
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3 steps to analyzing change in equilibrium
Market equilibrium
EXAMPLE: 
The Market for Hybrid Cars
- A Shift in Demand
- A Shift in Supply
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QUICK CHECK
Movie tickets and DVDs are substitutes. If the
price of DVDs increases, what happens in the
market for movie tickets?
 The supply curve shifts to the left.
 The supply curve shifts to the right.
 The demand curve shifts to the left.
 The demand curve shifts to the right.